Correlation Between Group 1 and AutoNation
Can any of the company-specific risk be diversified away by investing in both Group 1 and AutoNation 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 AutoNation 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 AutoNation, you can compare the effects of market volatilities on Group 1 and AutoNation 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 AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and AutoNation.
Diversification Opportunities for Group 1 and AutoNation
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Group and AutoNation is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation 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 AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Group 1 i.e., Group 1 and AutoNation go up and down completely randomly.
Pair Corralation between Group 1 and AutoNation
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.97 times more return on investment than AutoNation. However, Group 1 Automotive is 1.03 times less risky than AutoNation. It trades about 0.05 of its potential returns per unit of risk. AutoNation is currently generating about 0.03 per unit of risk. If you would invest 18,615 in Group 1 Automotive on January 24, 2024 and sell it today you would earn a total of 9,335 from holding Group 1 Automotive or generate 50.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Group 1 Automotive vs. AutoNation
Performance |
| Timeline |
| Group 1 Automotive |
| AutoNation |
Group 1 and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and AutoNation
The main advantage of trading using opposite Group 1 and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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