Correlation Between Asbury Automotive and NORFOLK

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

Diversification Opportunities for Asbury Automotive and NORFOLK

0.0

Correlation Coefficient

Asbury Automotive  NORFOLK

Pay attention - limited upside

The 3 months correlation between Asbury and NORFOLK is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and NORFOLK go up and down completely randomly.

Pair Corralation between Asbury Automotive and NORFOLK

Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 7.22 times more return on investment than NORFOLK. However, Asbury Automotive is 7.22 times more volatile than NORFOLK SOUTHN P. It trades about 0.04 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.11 per unit of risk. If you would invest  23,821  in Asbury Automotive Group on September 26, 2024 and sell it today you would earn a total of  883.00  from holding Asbury Automotive Group or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Asbury Automotive Group  vs.  NORFOLK SOUTHN P

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.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asbury Automotive and NORFOLK

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

The idea behind Asbury Automotive Group and NORFOLK SOUTHN P 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.