Correlation Between AALLN and Asbury Automotive

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

By analyzing existing cross correlation between AALLN 225 17 MAR 28 and Asbury Automotive Group, you can compare the effects of market volatilities on AALLN 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 AALLN with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of AALLN and Asbury Automotive.

Diversification Opportunities for AALLN and Asbury Automotive

0.22

Correlation Coefficient

AALLN  Asbury Automotive

Modest diversification

The 3 months correlation between AALLN and Asbury is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding AALLN 225 17 MAR 28 and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and AALLN 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 AALLN 225 17 MAR 28 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 AALLN i.e., AALLN and Asbury Automotive go up and down completely randomly.

Pair Corralation between AALLN and Asbury Automotive

Assuming the 90 days trading horizon AALLN 225 17 MAR 28 is expected to generate 1.3 times more return on investment than Asbury Automotive. However, AALLN is 1.3 times more volatile than Asbury Automotive Group. It trades about 0.06 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  9,140  in AALLN 225 17 MAR 28 on December 28, 2024 and sell it today you would earn a total of  173.00  from holding AALLN 225 17 MAR 28 or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	23.33%
Values	Daily Returns

AALLN 225 17 MAR 28  vs.  Asbury Automotive Group

AALLN 225 17

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AALLN 225 17 MAR 28 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AALLN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 AALLN and Asbury Automotive

The main advantage of trading using opposite AALLN and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AALLN 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 AALLN 225 17 MAR 28 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.