Correlation Between NextNav Warrant and Asbury Automotive

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

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

Diversification Opportunities for NextNav Warrant and Asbury Automotive

0.84

Correlation Coefficient

NextNav Warrant  Asbury Automotive

Very poor diversification

The 3 months correlation between NextNav and Asbury is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NextNav Warrant and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and NextNav Warrant 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 NextNav Warrant 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 NextNav Warrant i.e., NextNav Warrant and Asbury Automotive go up and down completely randomly.

Pair Corralation between NextNav Warrant and Asbury Automotive

Assuming the 90 days horizon NextNav Warrant is expected to generate 2.28 times more return on investment than Asbury Automotive. However, NextNav Warrant is 2.28 times more volatile than Asbury Automotive Group. It trades about 0.38 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.08 per unit of risk. If you would invest  235.00  in NextNav Warrant on September 3, 2024 and sell it today you would earn a total of  442.00  from holding NextNav Warrant or generate 188.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

NextNav Warrant  vs.  Asbury Automotive Group

NextNav Warrant

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Asbury Automotive

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 6 (%) 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 January 2025.

Pair Trading with NextNav Warrant and Asbury Automotive

The main advantage of trading using opposite NextNav Warrant and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextNav Warrant 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 NextNav Warrant 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.