Correlation Between Prestige Cars and Group 1
Can any of the company-specific risk be diversified away by investing in both Prestige Cars and Group 1 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 Prestige Cars and Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prestige Cars International and Group 1 Automotive, you can compare the effects of market volatilities on Prestige Cars and Group 1 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 Prestige Cars with a short position of Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prestige Cars and Group 1.
Diversification Opportunities for Prestige Cars and Group 1
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prestige and Group is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Cars International and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive and Prestige Cars 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 Prestige Cars International are associated (or correlated) with Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of Prestige Cars i.e., Prestige Cars and Group 1 go up and down completely randomly.
Pair Corralation between Prestige Cars and Group 1
Given the investment horizon of 90 days Prestige Cars is expected to generate 10.76 times less return on investment than Group 1. In addition to that, Prestige Cars is 5.39 times more volatile than Group 1 Automotive. It trades about 0.0 of its total potential returns per unit of risk. Group 1 Automotive is currently generating about 0.13 per unit of volatility. If you would invest 25,887 in Group 1 Automotive on August 28, 2024 and sell it today you would earn a total of 17,434 from holding Group 1 Automotive or generate 67.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Prestige Cars International vs. Group 1 Automotive
Performance |
| Timeline |
| Prestige Cars Intern |
| Group 1 Automotive |
Prestige Cars and Group 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prestige Cars and Group 1
The main advantage of trading using opposite Prestige Cars and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prestige Cars position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.| Prestige Cars vs. Group 1 Automotive | Prestige Cars vs. AutoNation | Prestige Cars vs. Sonic Automotive | Prestige Cars vs. Asbury Automotive Group |
| Group 1 vs. Kingsway Financial Services | Group 1 vs. KAR Auction Services | Group 1 vs. Cango Inc | Group 1 vs. Vroom Inc |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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