Correlation Between Five Below and Asbury Automotive

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

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

Diversification Opportunities for Five Below and Asbury Automotive

0.07

Correlation Coefficient

Five Below  Asbury Automotive

Significant diversification

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

Pair Corralation between Five Below and Asbury Automotive

Given the investment horizon of 90 days Five Below is expected to under-perform the Asbury Automotive. In addition to that, Five Below is 1.11 times more volatile than Asbury Automotive Group. It trades about -0.19 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.01 per unit of volatility. If you would invest  24,453  in Asbury Automotive Group on December 27, 2024 and sell it today you would lose (218.00) from holding Asbury Automotive Group or give up 0.89% of portfolio value over 90 days.

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

Five Below  vs.  Asbury Automotive Group

Five Below

Risk-Adjusted Performance

Very Weak

Over the last 90 days Five Below has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Five Below and Asbury Automotive

The main advantage of trading using opposite Five Below and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Below 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 Five Below 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.