Correlation Between Group 1 and CarGurus
Can any of the company-specific risk be diversified away by investing in both Group 1 and CarGurus 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 Group 1 and CarGurus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 1 Automotive and CarGurus, you can compare the effects of market volatilities on Group 1 and CarGurus 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 Group 1 with a short position of CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and CarGurus.
Diversification Opportunities for Group 1 and CarGurus
Almost no diversification
The 3 months correlation between Group and CarGurus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and Group 1 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 Group 1 Automotive are associated (or correlated) with CarGurus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarGurus has no effect on the direction of Group 1 i.e., Group 1 and CarGurus go up and down completely randomly.
Pair Corralation between Group 1 and CarGurus
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.62 times more return on investment than CarGurus. However, Group 1 Automotive is 1.62 times less risky than CarGurus. It trades about 0.37 of its potential returns per unit of risk. CarGurus is currently generating about 0.14 per unit of risk. If you would invest 41,490 in Group 1 Automotive on October 20, 2024 and sell it today you would earn a total of 3,276 from holding Group 1 Automotive or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. CarGurus
Performance |
| Timeline |
| Group 1 Automotive |
| CarGurus |
Group 1 and CarGurus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and CarGurus
The main advantage of trading using opposite Group 1 and CarGurus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, CarGurus 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 CarGurus will offset losses from the drop in CarGurus' long position.| Group 1 vs. Comfort Systems USA | Group 1 vs. MasTec Inc | Group 1 vs. EMCOR Group | Group 1 vs. Granite Construction Incorporated |
| CarGurus vs. KAR Auction Services | CarGurus vs. Kingsway Financial Services | CarGurus vs. Driven Brands Holdings | CarGurus vs. Group 1 Automotive |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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