Correlation Between Asbury Automotive and Brand Engagement

Can any of the company-specific risk be diversified away by investing in both Asbury Automotive and Brand Engagement 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 Brand Engagement 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 Brand Engagement Network, you can compare the effects of market volatilities on Asbury Automotive and Brand Engagement 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 Brand Engagement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Brand Engagement.

Diversification Opportunities for Asbury Automotive and Brand Engagement

-0.65

Correlation Coefficient

Asbury Automotive  Brand Engagement

Excellent diversification

The 3 months correlation between Asbury and Brand is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Brand Engagement Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brand Engagement Network 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 Brand Engagement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brand Engagement Network has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Brand Engagement go up and down completely randomly.

Pair Corralation between Asbury Automotive and Brand Engagement

Considering the 90-day investment horizon Asbury Automotive is expected to generate 13.18 times less return on investment than Brand Engagement. But when comparing it to its historical volatility, Asbury Automotive Group is 13.99 times less risky than Brand Engagement. It trades about 0.09 of its potential returns per unit of risk. Brand Engagement Network is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.41  in Brand Engagement Network on September 19, 2024 and sell it today you would lose (1.41) from holding Brand Engagement Network or give up 31.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	61.9%
Values	Daily Returns

Asbury Automotive Group  vs.  Brand Engagement Network

Asbury Automotive

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brand Engagement Network

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brand Engagement Network are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Brand Engagement showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asbury Automotive and Brand Engagement

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

The idea behind Asbury Automotive Group and Brand Engagement Network 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.