Correlation Between Group 1 and RH
Can any of the company-specific risk be diversified away by investing in both Group 1 and RH 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 RH 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 RH, you can compare the effects of market volatilities on Group 1 and RH 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 RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and RH.
Diversification Opportunities for Group 1 and RH
Average diversification
The 3 months correlation between Group and RH is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH 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 RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Group 1 i.e., Group 1 and RH go up and down completely randomly.
Pair Corralation between Group 1 and RH
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.58 times more return on investment than RH. However, Group 1 Automotive is 1.73 times less risky than RH. It trades about -0.07 of its potential returns per unit of risk. RH is currently generating about -0.28 per unit of risk. If you would invest 42,675 in Group 1 Automotive on December 16, 2024 and sell it today you would lose (4,081) from holding Group 1 Automotive or give up 9.56% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Group 1 Automotive vs. RH
Performance |
Timeline |
Group 1 Automotive |
RH |
Group 1 and RH Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Group 1 and RH
The main advantage of trading using opposite Group 1 and RH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, RH 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 RH will offset losses from the drop in RH's long position.Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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