Correlation Between Kingsway Financial and Asbury Automotive

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

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

Diversification Opportunities for Kingsway Financial and Asbury Automotive

-0.4

Correlation Coefficient

Kingsway Financial  Asbury Automotive

Very good diversification

The 3 months correlation between Kingsway and Asbury is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kingsway Financial Services and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Kingsway Financial 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 Kingsway Financial Services 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 Kingsway Financial i.e., Kingsway Financial and Asbury Automotive go up and down completely randomly.

Pair Corralation between Kingsway Financial and Asbury Automotive

Considering the 90-day investment horizon Kingsway Financial Services is expected to under-perform the Asbury Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Kingsway Financial Services is 1.74 times less risky than Asbury Automotive. The stock trades about -0.16 of its potential returns per unit of risk. The Asbury Automotive Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  25,983  in Asbury Automotive Group on November 29, 2024 and sell it today you would earn a total of  1,280  from holding Asbury Automotive Group or generate 4.93% return on investment over 90 days.

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

Kingsway Financial Services  vs.  Asbury Automotive Group

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Asbury Automotive

Risk-Adjusted Performance

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 inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Kingsway Financial and Asbury Automotive

The main advantage of trading using opposite Kingsway Financial and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingsway Financial 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 Kingsway Financial Services 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.