Correlation Between Southland Holdings and Asbury Automotive

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

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

Diversification Opportunities for Southland Holdings and Asbury Automotive

-0.47

Correlation Coefficient

Southland Holdings  Asbury Automotive

Very good diversification

The 3 months correlation between Southland and Asbury is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Southland Holdings and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Southland Holdings 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 Southland Holdings 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 Southland Holdings i.e., Southland Holdings and Asbury Automotive go up and down completely randomly.

Pair Corralation between Southland Holdings and Asbury Automotive

Given the investment horizon of 90 days Southland Holdings is expected to generate 2.27 times less return on investment than Asbury Automotive. In addition to that, Southland Holdings is 3.38 times more volatile than Asbury Automotive Group. It trades about 0.0 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.04 per unit of volatility. If you would invest  22,901  in Asbury Automotive Group on October 5, 2024 and sell it today you would earn a total of  741.00  from holding Asbury Automotive Group or generate 3.24% return on investment over 90 days.

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

Southland Holdings  vs.  Asbury Automotive Group

Southland Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southland Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Southland Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Asbury Automotive

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Southland Holdings and Asbury Automotive

The main advantage of trading using opposite Southland Holdings and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southland Holdings 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 Southland Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.