Correlation Between Asbury Automotive and Rush Enterprises

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

Diversification Opportunities for Asbury Automotive and Rush Enterprises

0.78

Correlation Coefficient

Asbury Automotive  Rush Enterprises

Poor diversification

The 3 months correlation between Asbury and Rush is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Rush Enterprises A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rush Enterprises A 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 Rush Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rush Enterprises A has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Rush Enterprises go up and down completely randomly.

Pair Corralation between Asbury Automotive and Rush Enterprises

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Rush Enterprises. In addition to that, Asbury Automotive is 1.3 times more volatile than Rush Enterprises A. It trades about -0.03 of its total potential returns per unit of risk. Rush Enterprises A is currently generating about 0.03 per unit of volatility. If you would invest  5,419  in Rush Enterprises A on December 28, 2024 and sell it today you would earn a total of  104.00  from holding Rush Enterprises A or generate 1.92% return on investment over 90 days.

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

Asbury Automotive Group  vs.  Rush Enterprises A

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 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.

Rush Enterprises A

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rush Enterprises A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Rush Enterprises is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asbury Automotive and Rush Enterprises

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

The idea behind Asbury Automotive Group and Rush Enterprises A 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.