Correlation Between Rush Enterprises and Asbury Automotive

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

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

Diversification Opportunities for Rush Enterprises and Asbury Automotive

0.78

Correlation Coefficient

Rush Enterprises  Asbury Automotive

Poor diversification

The 3 months correlation between Rush and Asbury is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rush Enterprises A and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Rush Enterprises 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 Rush Enterprises A 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 Rush Enterprises i.e., Rush Enterprises and Asbury Automotive go up and down completely randomly.

Pair Corralation between Rush Enterprises and Asbury Automotive

Assuming the 90 days horizon Rush Enterprises A is expected to generate 0.77 times more return on investment than Asbury Automotive. However, Rush Enterprises A is 1.3 times less risky than Asbury Automotive. It trades about 0.03 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.03 per unit of risk. If you would invest  5,419  in Rush Enterprises A on December 28, 2024 and sell it today you would earn a total of  104.00  from holding Rush Enterprises A or generate 1.92% return on investment over 90 days.

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

Rush Enterprises A  vs.  Asbury Automotive Group

Rush Enterprises A

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rush Enterprises A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Rush Enterprises is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Asbury Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asbury Automotive Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Asbury Automotive is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rush Enterprises and Asbury Automotive

The main advantage of trading using opposite Rush Enterprises and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rush Enterprises 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 Rush Enterprises A 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.