Correlation Between Asbury Automotive and Lulus Fashion

Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and Lulus Fashion 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 Lulus Fashion 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 Lulus Fashion Lounge, you can compare the effects of market volatilities on Asbury Automotive and Lulus Fashion 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 Lulus Fashion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Lulus Fashion.

Diversification Opportunities for Asbury Automotive and Lulus Fashion

-0.56

Correlation Coefficient

Asbury Automotive  Lulus Fashion

Excellent diversification

The 3 months correlation between Asbury and Lulus is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Lulus Fashion Lounge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lulus Fashion Lounge 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 Lulus Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lulus Fashion Lounge has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Lulus Fashion go up and down completely randomly.

Pair Corralation between Asbury Automotive and Lulus Fashion

Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 0.39 times more return on investment than Lulus Fashion. However, Asbury Automotive Group is 2.53 times less risky than Lulus Fashion. It trades about 0.04 of its potential returns per unit of risk. Lulus Fashion Lounge is currently generating about 0.01 per unit of risk. If you would invest  18,024  in Asbury Automotive Group on September 26, 2024 and sell it today you would earn a total of  6,680  from holding Asbury Automotive Group or generate 37.06% return on investment over 90 days.

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

Asbury Automotive Group  vs.  Lulus Fashion Lounge

Asbury Automotive

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Asbury Automotive is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Lulus Fashion Lounge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lulus Fashion Lounge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Asbury Automotive and Lulus Fashion

The main advantage of trading using opposite Asbury Automotive and Lulus Fashion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, Lulus Fashion 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 Lulus Fashion will offset losses from the drop in Lulus Fashion's long position.

The idea behind Asbury Automotive Group and Lulus Fashion Lounge 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.