Correlation Between Prestige Cars and Group 1

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

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

Diversification Opportunities for Prestige Cars and Group 1

0.34

Correlation Coefficient

Prestige Cars  Group 1

Weak diversification

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

Pair Corralation between Prestige Cars and Group 1

Given the investment horizon of 90 days Prestige Cars International is expected to generate 5.35 times more return on investment than Group 1. However, Prestige Cars is 5.35 times more volatile than Group 1 Automotive. It trades about 0.09 of its potential returns per unit of risk. Group 1 Automotive is currently generating about 0.0 per unit of risk. If you would invest  0.50  in Prestige Cars International on December 26, 2024 and sell it today you would earn a total of  0.15  from holding Prestige Cars International or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Prestige Cars International  vs.  Group 1 Automotive

Prestige Cars Intern

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Cars International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Prestige Cars exhibited solid returns over the last few months and may actually be approaching a breakup point.

Group 1 Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Group 1 Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Group 1 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Prestige Cars and Group 1

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

The idea behind Prestige Cars International and Group 1 Automotive 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.