Correlation Between Wayfair and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both Wayfair 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 Wayfair and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Asbury Automotive Group, you can compare the effects of market volatilities on Wayfair 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 Wayfair with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Asbury Automotive.
Diversification Opportunities for Wayfair and Asbury Automotive
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wayfair and Asbury is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Wayfair 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 Wayfair 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 Wayfair i.e., Wayfair and Asbury Automotive go up and down completely randomly.
Pair Corralation between Wayfair and Asbury Automotive
Taking into account the 90-day investment horizon Wayfair is expected to generate 2.63 times more return on investment than Asbury Automotive. However, Wayfair is 2.63 times more volatile than Asbury Automotive Group. It trades about 0.32 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 4,026 in Wayfair on September 18, 2024 and sell it today you would earn a total of 1,018 from holding Wayfair or generate 25.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. Asbury Automotive Group
Performance |
| Timeline |
| Wayfair |
| Asbury Automotive |
Wayfair and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Asbury Automotive
The main advantage of trading using opposite Wayfair and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair 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.The idea behind Wayfair and Asbury Automotive Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Asbury Automotive vs. Sonic Automotive | Asbury Automotive vs. Lithia Motors | Asbury Automotive vs. AutoNation | Asbury Automotive vs. Penske Automotive Group |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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