Correlation Between Canlan Ice and Asbury Automotive

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

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

Diversification Opportunities for Canlan Ice and Asbury Automotive

0.13

Correlation Coefficient

Canlan Ice  Asbury Automotive

Average diversification

The 3 months correlation between Canlan and Asbury is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Canlan Ice 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 Canlan Ice Sports 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 Canlan Ice i.e., Canlan Ice and Asbury Automotive go up and down completely randomly.

Pair Corralation between Canlan Ice and Asbury Automotive

Assuming the 90 days horizon Canlan Ice Sports is expected to generate 0.03 times more return on investment than Asbury Automotive. However, Canlan Ice Sports is 30.45 times less risky than Asbury Automotive. It trades about 0.13 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.04 per unit of risk. If you would invest  295.00  in Canlan Ice Sports on December 27, 2024 and sell it today you would earn a total of  2.00  from holding Canlan Ice Sports or generate 0.68% return on investment over 90 days.

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

Canlan Ice Sports  vs.  Asbury Automotive Group

Canlan Ice Sports

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Canlan Ice and Asbury Automotive

The main advantage of trading using opposite Canlan Ice and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice 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 Canlan Ice Sports 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..