Correlation Between Sable Offshore and Asbury Automotive

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

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

Diversification Opportunities for Sable Offshore and Asbury Automotive

0.46

Correlation Coefficient

Sable Offshore  Asbury Automotive

Very weak diversification

The 3 months correlation between Sable and Asbury is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sable Offshore Corp and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Sable Offshore 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 Sable Offshore Corp 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 Sable Offshore i.e., Sable Offshore and Asbury Automotive go up and down completely randomly.

Pair Corralation between Sable Offshore and Asbury Automotive

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 2.16 times more return on investment than Asbury Automotive. However, Sable Offshore is 2.16 times more volatile than Asbury Automotive Group. It trades about 0.11 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.01 per unit of risk. If you would invest  1,964  in Sable Offshore Corp on December 18, 2024 and sell it today you would earn a total of  572.00  from holding Sable Offshore Corp or generate 29.12% return on investment over 90 days.

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

Sable Offshore Corp  vs.  Asbury Automotive Group

Sable Offshore Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sable Offshore Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sable Offshore exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Sable Offshore and Asbury Automotive

The main advantage of trading using opposite Sable Offshore and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sable Offshore 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 Sable Offshore Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.