Correlation Between AutoNation and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both AutoNation and Asbury Automotive 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 AutoNation and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Asbury Automotive Group, you can compare the effects of market volatilities on AutoNation and Asbury Automotive 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 AutoNation with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Asbury Automotive.
Diversification Opportunities for AutoNation and Asbury Automotive
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AutoNation and Asbury is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and AutoNation 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 AutoNation are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of AutoNation i.e., AutoNation and Asbury Automotive go up and down completely randomly.
Pair Corralation between AutoNation and Asbury Automotive
Assuming the 90 days horizon AutoNation is expected to generate 0.92 times more return on investment than Asbury Automotive. However, AutoNation is 1.08 times less risky than Asbury Automotive. It trades about 0.06 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.04 per unit of risk. If you would invest 10,080 in AutoNation on September 24, 2024 and sell it today you would earn a total of 6,150 from holding AutoNation or generate 61.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Asbury Automotive Group
Performance |
| Timeline |
| AutoNation |
| Asbury Automotive |
AutoNation and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Asbury Automotive
The main advantage of trading using opposite AutoNation and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Asbury Automotive 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 Asbury Automotive will offset losses from the drop in Asbury Automotive's long position.| AutoNation vs. Copart Inc | AutoNation vs. Zhongsheng Group Holdings | AutoNation vs. CarMax Inc | AutoNation vs. DIeteren Group SA |
| Asbury Automotive vs. Copart Inc | Asbury Automotive vs. Zhongsheng Group Holdings | Asbury Automotive vs. CarMax Inc | Asbury Automotive vs. DIeteren Group SA |
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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