Correlation Between GMS and Asbury Automotive

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

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

Diversification Opportunities for GMS and Asbury Automotive

0.66

Correlation Coefficient

GMS  Asbury Automotive

Poor diversification

The 3 months correlation between GMS and Asbury is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and GMS 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 GMS Inc 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 GMS i.e., GMS and Asbury Automotive go up and down completely randomly.

Pair Corralation between GMS and Asbury Automotive

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Asbury Automotive. In addition to that, GMS is 1.06 times more volatile than Asbury Automotive Group. It trades about -0.25 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.14 per unit of volatility. If you would invest  25,920  in Asbury Automotive Group on October 7, 2024 and sell it today you would lose (2,227) from holding Asbury Automotive Group or give up 8.59% of portfolio value over 90 days.

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

GMS Inc  vs.  Asbury Automotive Group

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Asbury Automotive

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 GMS and Asbury Automotive

The main advantage of trading using opposite GMS and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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 GMS Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.