Correlation Between Asbury Automotive and Mercedes Benz

Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and Mercedes Benz 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 Asbury Automotive and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asbury Automotive Group and Mercedes Benz Group, you can compare the effects of market volatilities on Asbury Automotive and Mercedes Benz 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 Asbury Automotive with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Mercedes Benz.

Diversification Opportunities for Asbury Automotive and Mercedes Benz

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Correlation Coefficient

Asbury Automotive  Mercedes Benz

Pay attention - limited upside

The @@bw1eo months correlation between Asbury and Mercedes is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Mercedes Benz Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group and Asbury Automotive 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 Asbury Automotive Group are associated (or correlated) with Mercedes Benz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Mercedes Benz go up and down completely randomly.

Pair Corralation between Asbury Automotive and Mercedes Benz

If you would invest  20,207  in Asbury Automotive Group on February 3, 2024 and sell it today you would earn a total of  1,168  from holding Asbury Automotive Group or generate 5.78% return on investment over 90 days.

Time Period	@@bw1EO Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Asbury Automotive Group  vs.  Mercedes Benz Group

Asbury Automotive

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Asbury Automotive Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mercedes Benz Group

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Mercedes Benz Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Mercedes Benz is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Asbury Automotive and Mercedes Benz

The main advantage of trading using opposite Asbury Automotive and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive position performs unexpectedly, Mercedes Benz 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 Mercedes Benz will offset losses from the drop in Mercedes Benz's long position.

The idea behind Asbury Automotive Group and Mercedes Benz 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.