Correlation Between GM and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Asbury Automotive Group, you can compare the effects of market volatilities on GM 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 GM with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Asbury Automotive.
Diversification Opportunities for GM and Asbury Automotive
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Asbury is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and GM 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 General Motors 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 GM i.e., GM and Asbury Automotive go up and down completely randomly.
Pair Corralation between GM and Asbury Automotive
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Asbury Automotive. In addition to that, GM is 1.9 times more volatile than Asbury Automotive Group. It trades about -0.16 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about -0.04 per unit of volatility. If you would invest 25,590 in Asbury Automotive Group on September 18, 2024 and sell it today you would lose (360.00) from holding Asbury Automotive Group or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Asbury Automotive Group
Performance |
| Timeline |
| General Motors |
| Asbury Automotive |
GM and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Asbury Automotive
The main advantage of trading using opposite GM and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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