Correlation Between Arm Holdings and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both Arm Holdings 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 Arm Holdings and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arm Holdings plc and Asbury Automotive Group, you can compare the effects of market volatilities on Arm Holdings 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 Arm Holdings with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and Asbury Automotive.
Diversification Opportunities for Arm Holdings and Asbury Automotive
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Arm and Asbury is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Arm Holdings 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 Arm Holdings plc 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 Arm Holdings i.e., Arm Holdings and Asbury Automotive go up and down completely randomly.
Pair Corralation between Arm Holdings and Asbury Automotive
Considering the 90-day investment horizon Arm Holdings plc is expected to generate 2.2 times more return on investment than Asbury Automotive. However, Arm Holdings is 2.2 times more volatile than Asbury Automotive Group. It trades about 0.07 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 6,359 in Arm Holdings plc on November 2, 2024 and sell it today you would earn a total of 8,964 from holding Arm Holdings plc or generate 140.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 70.24% |
| Values | Daily Returns |
Arm Holdings plc vs. Asbury Automotive Group
Performance |
| Timeline |
| Arm Holdings plc |
| Asbury Automotive |
Arm Holdings and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arm Holdings and Asbury Automotive
The main advantage of trading using opposite Arm Holdings and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arm Holdings 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.| Arm Holdings vs. BioNTech SE | Arm Holdings vs. Kuya Silver | Arm Holdings vs. Nicola Mining | Arm Holdings vs. Tarsus Pharmaceuticals |
| Asbury Automotive vs. Sonic Automotive | Asbury Automotive vs. Lithia Motors | Asbury Automotive vs. AutoNation | Asbury Automotive vs. Penske Automotive Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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