Correlation Between Asbury Automotive and CarPartsCom

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

Diversification Opportunities for Asbury Automotive and CarPartsCom

0.19

Correlation Coefficient

Asbury Automotive  CarPartsCom

Average diversification

The 3 months correlation between Asbury and CarPartsCom is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom 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 CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and CarPartsCom go up and down completely randomly.

Pair Corralation between Asbury Automotive and CarPartsCom

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the CarPartsCom. But the stock apears to be less risky and, when comparing its historical volatility, Asbury Automotive Group is 2.8 times less risky than CarPartsCom. The stock trades about -0.05 of its potential returns per unit of risk. The CarPartsCom is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  102.00  in CarPartsCom on December 30, 2024 and sell it today you would lose (11.00) from holding CarPartsCom or give up 10.78% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  CarPartsCom

Asbury Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asbury Automotive Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CarPartsCom

Risk-Adjusted Performance

Very Weak

Over the last 90 days CarPartsCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CarPartsCom is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Asbury Automotive and CarPartsCom

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

The idea behind Asbury Automotive Group and CarPartsCom 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.