Correlation Between Asbury Automotive and Sanyo Chemical

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

Diversification Opportunities for Asbury Automotive and Sanyo Chemical

-0.48

Correlation Coefficient

Asbury Automotive  Sanyo Chemical

Very good diversification

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

Pair Corralation between Asbury Automotive and Sanyo Chemical

Assuming the 90 days horizon Asbury Automotive Group is expected to under-perform the Sanyo Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Asbury Automotive Group is 1.03 times less risky than Sanyo Chemical. The stock trades about -0.46 of its potential returns per unit of risk. The Sanyo Chemical Industries is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Sanyo Chemical Industries on October 8, 2024 and sell it today you would lose (20.00) from holding Sanyo Chemical Industries or give up 0.8% of portfolio value over 90 days.

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

Asbury Automotive Group  vs.  Sanyo Chemical Industries

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.

Sanyo Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanyo Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Asbury Automotive and Sanyo Chemical

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

The idea behind Asbury Automotive Group and Sanyo Chemical Industries 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.