Correlation Between Group 1 and Townsquare Media
Can any of the company-specific risk be diversified away by investing in both Group 1 and Townsquare Media 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 Townsquare Media 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 Townsquare Media, you can compare the effects of market volatilities on Group 1 and Townsquare Media 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 Townsquare Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Townsquare Media.
Diversification Opportunities for Group 1 and Townsquare Media
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Group and Townsquare is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Group 1 i.e., Group 1 and Townsquare Media go up and down completely randomly.
Pair Corralation between Group 1 and Townsquare Media
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 1.08 times more return on investment than Townsquare Media. However, Group 1 is 1.08 times more volatile than Townsquare Media. It trades about 0.02 of its potential returns per unit of risk. Townsquare Media is currently generating about -0.15 per unit of risk. If you would invest 44,957 in Group 1 Automotive on November 25, 2024 and sell it today you would earn a total of 159.00 from holding Group 1 Automotive or generate 0.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Group 1 Automotive vs. Townsquare Media
Performance |
Timeline |
Group 1 Automotive |
Townsquare Media |
Group 1 and Townsquare Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Group 1 and Townsquare Media
The main advantage of trading using opposite Group 1 and Townsquare Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Townsquare Media 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 Townsquare Media will offset losses from the drop in Townsquare Media's long position.Group 1 vs. Penske Automotive Group | ||
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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