Correlation Between Asbury Automotive and Tandy Leather
Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and Tandy Leather 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 Tandy Leather 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 Tandy Leather Factory, you can compare the effects of market volatilities on Asbury Automotive and Tandy Leather 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 Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Tandy Leather.
Diversification Opportunities for Asbury Automotive and Tandy Leather
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asbury and Tandy is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory 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 Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Tandy Leather go up and down completely randomly.
Pair Corralation between Asbury Automotive and Tandy Leather
Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 0.91 times more return on investment than Tandy Leather. However, Asbury Automotive Group is 1.1 times less risky than Tandy Leather. It trades about 0.01 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about -0.07 per unit of risk. If you would invest 24,453 in Asbury Automotive Group on December 27, 2024 and sell it today you would lose (218.00) from holding Asbury Automotive Group or give up 0.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Asbury Automotive Group vs. Tandy Leather Factory
Performance |
Timeline |
Asbury Automotive |
Tandy Leather Factory |
Asbury Automotive and Tandy Leather Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Asbury Automotive and Tandy Leather
The main advantage of trading using opposite Asbury Automotive and Tandy Leather positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, Tandy Leather 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 Tandy Leather will offset losses from the drop in Tandy Leather's long position.Asbury Automotive vs. Sonic Automotive | Asbury Automotive vs. Lithia Motors | Asbury Automotive vs. AutoNation | Asbury Automotive vs. Penske Automotive Group |
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Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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