Correlation Between National Vision and Asbury Automotive

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

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

Diversification Opportunities for National Vision and Asbury Automotive

0.76

Correlation Coefficient

National Vision  Asbury Automotive

Poor diversification

The 3 months correlation between National and Asbury is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and National Vision 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 National Vision Holdings are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of National Vision i.e., National Vision and Asbury Automotive go up and down completely randomly.

Pair Corralation between National Vision and Asbury Automotive

Considering the 90-day investment horizon National Vision Holdings is expected to under-perform the Asbury Automotive. In addition to that, National Vision is 1.42 times more volatile than Asbury Automotive Group. It trades about -0.04 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.03 per unit of volatility. If you would invest  24,273  in Asbury Automotive Group on September 1, 2024 and sell it today you would earn a total of  1,710  from holding Asbury Automotive Group or generate 7.04% return on investment over 90 days.

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

National Vision Holdings  vs.  Asbury Automotive Group

National Vision Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

Asbury Automotive

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Asbury Automotive may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with National Vision and Asbury Automotive

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

The idea behind National Vision Holdings and Asbury Automotive 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.