Correlation Between Asbury Automotive and ABM Industries
Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and ABM Industries 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 Asbury Automotive and ABM Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asbury Automotive Group and ABM Industries Incorporated, you can compare the effects of market volatilities on Asbury Automotive and ABM Industries 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 Asbury Automotive with a short position of ABM Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and ABM Industries.
Diversification Opportunities for Asbury Automotive and ABM Industries
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Asbury and ABM is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and ABM Industries Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABM Industries and Asbury Automotive 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 Asbury Automotive Group are associated (or correlated) with ABM Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABM Industries has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and ABM Industries go up and down completely randomly.
Pair Corralation between Asbury Automotive and ABM Industries
Considering the 90-day investment horizon Asbury Automotive is expected to generate 1.39 times less return on investment than ABM Industries. In addition to that, Asbury Automotive is 1.15 times more volatile than ABM Industries Incorporated. It trades about 0.03 of its total potential returns per unit of risk. ABM Industries Incorporated is currently generating about 0.04 per unit of volatility. If you would invest 4,575 in ABM Industries Incorporated on August 31, 2024 and sell it today you would earn a total of 1,142 from holding ABM Industries Incorporated or generate 24.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asbury Automotive Group vs. ABM Industries Incorporated
Performance |
| Timeline |
| Asbury Automotive |
| ABM Industries |
Asbury Automotive and ABM Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asbury Automotive and ABM Industries
The main advantage of trading using opposite Asbury Automotive and ABM Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, ABM Industries 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 ABM Industries will offset losses from the drop in ABM Industries' long position.| Asbury Automotive vs. Sonic Automotive | Asbury Automotive vs. Lithia Motors | Asbury Automotive vs. AutoNation | Asbury Automotive vs. Penske Automotive Group |
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Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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