Correlation Between Asbury Automotive and Orchestra BioMed

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

Diversification Opportunities for Asbury Automotive and Orchestra BioMed

0.27

Correlation Coefficient

Asbury Automotive  Orchestra BioMed

Modest diversification

The 3 months correlation between Asbury and Orchestra is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Orchestra BioMed Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchestra BioMed Holdings 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 Orchestra BioMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchestra BioMed Holdings has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Orchestra BioMed go up and down completely randomly.

Pair Corralation between Asbury Automotive and Orchestra BioMed

Considering the 90-day investment horizon Asbury Automotive is expected to generate 2.33 times less return on investment than Orchestra BioMed. But when comparing it to its historical volatility, Asbury Automotive Group is 3.37 times less risky than Orchestra BioMed. It trades about 0.03 of its potential returns per unit of risk. Orchestra BioMed Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,001  in Orchestra BioMed Holdings on October 7, 2024 and sell it today you would lose (422.00) from holding Orchestra BioMed Holdings or give up 42.16% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  Orchestra BioMed Holdings

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.

Orchestra BioMed Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orchestra BioMed Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Orchestra BioMed displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asbury Automotive and Orchestra BioMed

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

The idea behind Asbury Automotive Group and Orchestra BioMed Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.