Correlation Between Asbury Automotive and 14575EAA3

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Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and 14575EAA3 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 14575EAA3 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 US14575EAA38, you can compare the effects of market volatilities on Asbury Automotive and 14575EAA3 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 14575EAA3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and 14575EAA3.

Diversification Opportunities for Asbury Automotive and 14575EAA3

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Asbury and 14575EAA3 is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and US14575EAA38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US14575EAA38 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 14575EAA3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US14575EAA38 has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and 14575EAA3 go up and down completely randomly.

Pair Corralation between Asbury Automotive and 14575EAA3

Considering the 90-day investment horizon Asbury Automotive Group is expected to under-perform the 14575EAA3. But the stock apears to be less risky and, when comparing its historical volatility, Asbury Automotive Group is 2.84 times less risky than 14575EAA3. The stock trades about -0.33 of its potential returns per unit of risk. The US14575EAA38 is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  10,011  in US14575EAA38 on October 9, 2024 and sell it today you would lose (437.00) from holding US14575EAA38 or give up 4.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy73.68%
ValuesDaily Returns

Asbury Automotive Group  vs.  US14575EAA38

 Performance 
       Timeline  
Asbury Automotive 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in February 2025.
US14575EAA38 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days US14575EAA38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 14575EAA3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Asbury Automotive and 14575EAA3 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Asbury Automotive and 14575EAA3

The main advantage of trading using opposite Asbury Automotive and 14575EAA3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, 14575EAA3 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 14575EAA3 will offset losses from the drop in 14575EAA3's long position.
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The idea behind Asbury Automotive Group and US14575EAA38 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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