Correlation Between Gap, and Group 1

Can any of the company-specific risk be diversified away by investing in both Gap, and Group 1 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 Gap, and Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Gap, and Group 1 Automotive, you can compare the effects of market volatilities on Gap, and Group 1 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 Gap, with a short position of Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Group 1.

Diversification Opportunities for Gap, and Group 1

0.8

Correlation Coefficient

Gap,  Group 1

Very poor diversification

The 3 months correlation between Gap, and Group is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive and Gap, 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 The Gap, are associated (or correlated) with Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of Gap, i.e., Gap, and Group 1 go up and down completely randomly.

Pair Corralation between Gap, and Group 1

Considering the 90-day investment horizon The Gap, is expected to under-perform the Group 1. In addition to that, Gap, is 1.8 times more volatile than Group 1 Automotive. It trades about -0.17 of its total potential returns per unit of risk. Group 1 Automotive is currently generating about -0.05 per unit of volatility. If you would invest  42,469  in Group 1 Automotive on October 10, 2024 and sell it today you would lose (509.00) from holding Group 1 Automotive or give up 1.2% of portfolio value over 90 days.

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

The Gap,  vs.  Group 1 Automotive

Gap,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Group 1 Automotive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Group 1 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gap, and Group 1

The main advantage of trading using opposite Gap, and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.

The idea behind The Gap, and Group 1 Automotive 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.