Correlation Between AES Corp and Asbury Automotive

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

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

Diversification Opportunities for AES Corp and Asbury Automotive

-0.07

Correlation Coefficient

AES Corp  Asbury Automotive

Good diversification

The 3 months correlation between AES and Asbury is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp Unit and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and AES Corp 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 AES Corp Unit 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 AES Corp i.e., AES Corp and Asbury Automotive go up and down completely randomly.

Pair Corralation between AES Corp and Asbury Automotive

If you would invest  21,981  in Asbury Automotive Group on September 15, 2024 and sell it today you would earn a total of  3,391  from holding Asbury Automotive Group or generate 15.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

AES Corp Unit  vs.  Asbury Automotive Group

AES Corp Unit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AES Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Asbury Automotive

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental drivers, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AES Corp and Asbury Automotive

The main advantage of trading using opposite AES Corp and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES Corp 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 AES Corp Unit 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.