Correlation Between Asbury Automotive and DICKS Sporting

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

Diversification Opportunities for Asbury Automotive and DICKS Sporting

0.39

Correlation Coefficient

Asbury Automotive  DICKS Sporting

Weak diversification

The 3 months correlation between Asbury and DICKS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods 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 DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and DICKS Sporting go up and down completely randomly.

Pair Corralation between Asbury Automotive and DICKS Sporting

Assuming the 90 days horizon Asbury Automotive is expected to generate 5.32 times less return on investment than DICKS Sporting. But when comparing it to its historical volatility, Asbury Automotive Group is 1.27 times less risky than DICKS Sporting. It trades about 0.03 of its potential returns per unit of risk. DICKS Sporting Goods is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,719  in DICKS Sporting Goods on October 5, 2024 and sell it today you would earn a total of  12,191  from holding DICKS Sporting Goods or generate 125.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.68%
Values	Daily Returns

Asbury Automotive Group  vs.  DICKS Sporting Goods

Asbury Automotive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DICKS Sporting Goods

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days DICKS Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asbury Automotive and DICKS Sporting

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

The idea behind Asbury Automotive Group and DICKS Sporting Goods 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.