Correlation Between Group 1 and Ameriprise Financial

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

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

Diversification Opportunities for Group 1 and Ameriprise Financial

0.34

Correlation Coefficient

Group 1  Ameriprise Financial

Weak diversification

The 3 months correlation between Group and Ameriprise is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and Group 1 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 Group 1 Automotive are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Group 1 i.e., Group 1 and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Group 1 and Ameriprise Financial

Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.86 times more return on investment than Ameriprise Financial. However, Group 1 Automotive is 1.16 times less risky than Ameriprise Financial. It trades about 0.24 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.2 per unit of risk. If you would invest  41,846  in Group 1 Automotive on October 24, 2024 and sell it today you would earn a total of  2,159  from holding Group 1 Automotive or generate 5.16% return on investment over 90 days.

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

Group 1 Automotive  vs.  Ameriprise Financial

Group 1 Automotive

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 16 (%) 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.

Ameriprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Ameriprise Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Group 1 and Ameriprise Financial

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

The idea behind Group 1 Automotive and Ameriprise Financial 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.