Correlation Between Vantage Drilling and Asbury Automotive

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

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

Diversification Opportunities for Vantage Drilling and Asbury Automotive

0.22

Correlation Coefficient

Vantage Drilling  Asbury Automotive

Modest diversification

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

Pair Corralation between Vantage Drilling and Asbury Automotive

Assuming the 90 days horizon Vantage Drilling International is expected to under-perform the Asbury Automotive. In addition to that, Vantage Drilling is 2.61 times more volatile than Asbury Automotive Group. It trades about -0.13 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.02 per unit of volatility. If you would invest  24,577  in Asbury Automotive Group on December 20, 2024 and sell it today you would lose (1,121) from holding Asbury Automotive Group or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Vantage Drilling International  vs.  Asbury Automotive Group

Vantage Drilling Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vantage Drilling International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Vantage Drilling and Asbury Automotive

The main advantage of trading using opposite Vantage Drilling and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vantage Drilling 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 Vantage Drilling International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.