Correlation Between Albertsons Companies and Asbury Automotive

Can any of the company-specific risk be diversified away by investing in both Albertsons Companies and Asbury Automotive 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 Albertsons Companies and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Albertsons Companies and Asbury Automotive Group, you can compare the effects of market volatilities on Albertsons Companies and Asbury Automotive 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 Albertsons Companies with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albertsons Companies and Asbury Automotive.

Diversification Opportunities for Albertsons Companies and Asbury Automotive

0.22

Correlation Coefficient

Albertsons Companies  Asbury Automotive

Modest diversification

The 3 months correlation between Albertsons and Asbury is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Albertsons Companies and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Albertsons Companies 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 Albertsons Companies are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of Albertsons Companies i.e., Albertsons Companies and Asbury Automotive go up and down completely randomly.

Pair Corralation between Albertsons Companies and Asbury Automotive

Considering the 90-day investment horizon Albertsons Companies is expected to generate 0.66 times more return on investment than Asbury Automotive. However, Albertsons Companies is 1.52 times less risky than Asbury Automotive. It trades about 0.12 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.02 per unit of risk. If you would invest  1,937  in Albertsons Companies on December 20, 2024 and sell it today you would earn a total of  226.00  from holding Albertsons Companies or generate 11.67% return on investment over 90 days.

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

Albertsons Companies  vs.  Asbury Automotive Group

Albertsons Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albertsons Companies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Albertsons Companies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Albertsons Companies and Asbury Automotive

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

The idea behind Albertsons Companies and Asbury Automotive Group 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.