Correlation Between Asbury Automotive and Weibo Corp

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

Diversification Opportunities for Asbury Automotive and Weibo Corp

0.48

Correlation Coefficient

Asbury Automotive  Weibo Corp

Very weak diversification

The 3 months correlation between Asbury and Weibo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Weibo Corp go up and down completely randomly.

Pair Corralation between Asbury Automotive and Weibo Corp

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the Weibo Corp. But the stock apears to be less risky and, when comparing its historical volatility, Asbury Automotive Group is 1.07 times less risky than Weibo Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Weibo Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Weibo Corp on December 19, 2024 and sell it today you would earn a total of  100.00  from holding Weibo Corp or generate 10.15% return on investment over 90 days.

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

Asbury Automotive Group  vs.  Weibo Corp

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.

Weibo Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Asbury Automotive and Weibo Corp

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

The idea behind Asbury Automotive Group and Weibo Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.