Correlation Between Group 1 and Full House
Can any of the company-specific risk be diversified away by investing in both Group 1 and Full House 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 Full House 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 Full House Resorts, you can compare the effects of market volatilities on Group 1 and Full House 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 Full House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Full House.
Diversification Opportunities for Group 1 and Full House
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Group and Full is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Full House Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Full House Resorts 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 Full House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Full House Resorts has no effect on the direction of Group 1 i.e., Group 1 and Full House go up and down completely randomly.
Pair Corralation between Group 1 and Full House
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.97 times more return on investment than Full House. However, Group 1 Automotive is 1.03 times less risky than Full House. It trades about 0.36 of its potential returns per unit of risk. Full House Resorts is currently generating about -0.02 per unit of risk. If you would invest 35,285 in Group 1 Automotive on August 28, 2024 and sell it today you would earn a total of 8,036 from holding Group 1 Automotive or generate 22.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. Full House Resorts
Performance |
| Timeline |
| Group 1 Automotive |
| Full House Resorts |
Group 1 and Full House Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and Full House
The main advantage of trading using opposite Group 1 and Full House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Full House 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 Full House will offset losses from the drop in Full House's long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| Full House vs. Monarch Casino Resort | Full House vs. Red Rock Resorts | Full House vs. Golden Entertainment | Full House vs. Playa Hotels Resorts |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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