Correlation Between Birks and Asbury Automotive

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

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

Diversification Opportunities for Birks and Asbury Automotive

-0.48

Correlation Coefficient

Birks  Asbury Automotive

Very good diversification

The 3 months correlation between Birks and Asbury is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Birks 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 Birks Group 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 Birks i.e., Birks and Asbury Automotive go up and down completely randomly.

Pair Corralation between Birks and Asbury Automotive

Considering the 90-day investment horizon Birks Group is expected to under-perform the Asbury Automotive. In addition to that, Birks is 1.35 times more volatile than Asbury Automotive Group. It trades about -0.28 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.05 per unit of volatility. If you would invest  24,564  in Asbury Automotive Group on August 30, 2024 and sell it today you would earn a total of  1,439  from holding Asbury Automotive Group or generate 5.86% return on investment over 90 days.

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

Birks Group  vs.  Asbury Automotive Group

Birks Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Asbury Automotive

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Birks and Asbury Automotive

The main advantage of trading using opposite Birks and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birks 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 Birks Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.