Correlation Between Asbury Automotive and LithiumBank Resources

Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and LithiumBank Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Asbury Automotive and LithiumBank Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asbury Automotive Group and LithiumBank Resources Corp, you can compare the effects of market volatilities on Asbury Automotive and LithiumBank Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Asbury Automotive with a short position of LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and LithiumBank Resources.

Diversification Opportunities for Asbury Automotive and LithiumBank Resources

-0.85

Correlation Coefficient

Asbury Automotive  LithiumBank Resources

Pay attention - limited upside

The 3 months correlation between Asbury and LithiumBank is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources and Asbury Automotive is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Asbury Automotive Group are associated (or correlated) with LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and LithiumBank Resources go up and down completely randomly.

Pair Corralation between Asbury Automotive and LithiumBank Resources

Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 0.37 times more return on investment than LithiumBank Resources. However, Asbury Automotive Group is 2.68 times less risky than LithiumBank Resources. It trades about -0.04 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about -0.3 per unit of risk. If you would invest  25,590  in Asbury Automotive Group on September 19, 2024 and sell it today you would lose (360.00) from holding Asbury Automotive Group or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Asbury Automotive Group  vs.  LithiumBank Resources Corp

Asbury Automotive

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LithiumBank Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LithiumBank Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Asbury Automotive and LithiumBank Resources

The main advantage of trading using opposite Asbury Automotive and LithiumBank Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, LithiumBank Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LithiumBank Resources will offset losses from the drop in LithiumBank Resources' long position.

The idea behind Asbury Automotive Group and LithiumBank Resources Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.