Correlation Between ACV Auctions and Group 1

Can any of the company-specific risk be diversified away by investing in both ACV Auctions and Group 1 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 ACV Auctions and Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ACV Auctions and Group 1 Automotive, you can compare the effects of market volatilities on ACV Auctions and Group 1 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 ACV Auctions with a short position of Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACV Auctions and Group 1.

Diversification Opportunities for ACV Auctions and Group 1

0.84

Correlation Coefficient

ACV Auctions  Group 1

Very poor diversification

The 3 months correlation between ACV and Group is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ACV Auctions and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive and ACV Auctions 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 ACV Auctions are associated (or correlated) with Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of ACV Auctions i.e., ACV Auctions and Group 1 go up and down completely randomly.

Pair Corralation between ACV Auctions and Group 1

Given the investment horizon of 90 days ACV Auctions is expected to generate 1.23 times less return on investment than Group 1. In addition to that, ACV Auctions is 1.53 times more volatile than Group 1 Automotive. It trades about 0.05 of its total potential returns per unit of risk. Group 1 Automotive is currently generating about 0.09 per unit of volatility. If you would invest  28,174  in Group 1 Automotive on September 14, 2024 and sell it today you would earn a total of  14,536  from holding Group 1 Automotive or generate 51.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ACV Auctions  vs.  Group 1 Automotive

ACV Auctions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACV Auctions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ACV Auctions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Group 1 Automotive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Group 1 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACV Auctions and Group 1

The main advantage of trading using opposite ACV Auctions and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACV Auctions position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.

The idea behind ACV Auctions and Group 1 Automotive 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.