Correlation Between Ross Stores and Asbury Automotive

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

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

Diversification Opportunities for Ross Stores and Asbury Automotive

0.14

Correlation Coefficient

Ross Stores  Asbury Automotive

Average diversification

The 3 months correlation between Ross and Asbury is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and Asbury Automotive go up and down completely randomly.

Pair Corralation between Ross Stores and Asbury Automotive

Given the investment horizon of 90 days Ross Stores is expected to generate 13.8 times less return on investment than Asbury Automotive. But when comparing it to its historical volatility, Ross Stores is 1.35 times less risky than Asbury Automotive. It trades about 0.01 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  21,981  in Asbury Automotive Group on September 15, 2024 and sell it today you would earn a total of  3,391  from holding Asbury Automotive Group or generate 15.43% return on investment over 90 days.

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

Ross Stores  vs.  Asbury Automotive Group

Ross Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Asbury Automotive

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental drivers, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ross Stores and Asbury Automotive

The main advantage of trading using opposite Ross Stores and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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 Ross Stores 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.