Correlation Between Group 1 and Global Payments
Can any of the company-specific risk be diversified away by investing in both Group 1 and Global Payments 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 Global Payments 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 Global Payments, you can compare the effects of market volatilities on Group 1 and Global Payments 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 Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Global Payments.
Diversification Opportunities for Group 1 and Global Payments
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Group and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 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 Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Group 1 i.e., Group 1 and Global Payments go up and down completely randomly.
Pair Corralation between Group 1 and Global Payments
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 1.13 times more return on investment than Global Payments. However, Group 1 is 1.13 times more volatile than Global Payments. It trades about 0.08 of its potential returns per unit of risk. Global Payments is currently generating about 0.04 per unit of risk. If you would invest 24,434 in Group 1 Automotive on August 31, 2024 and sell it today you would earn a total of 18,146 from holding Group 1 Automotive or generate 74.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. Global Payments
Performance |
| Timeline |
| Group 1 Automotive |
| Global Payments |
Group 1 and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and Global Payments
The main advantage of trading using opposite Group 1 and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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