Correlation Between Asbury Automotive and Cabo Drilling

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

Diversification Opportunities for Asbury Automotive and Cabo Drilling

0.0

Correlation Coefficient

Asbury Automotive  Cabo Drilling

Pay attention - limited upside

The 3 months correlation between Asbury and Cabo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Cabo Drilling Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabo Drilling Corp 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 Cabo Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabo Drilling Corp has no effect on the direction of Asbury Automotive i.e., Asbury Automotive and Cabo Drilling go up and down completely randomly.

Pair Corralation between Asbury Automotive and Cabo Drilling

If you would invest  21,219  in Asbury Automotive Group on September 14, 2024 and sell it today you would earn a total of  4,153  from holding Asbury Automotive Group or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Asbury Automotive Group  vs.  Cabo Drilling Corp

Asbury Automotive

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Cabo Drilling Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabo Drilling Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cabo Drilling 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 Cabo Drilling

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

The idea behind Asbury Automotive Group and Cabo Drilling Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.