Correlation Between Group 1 and ACV Auctions

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

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

Diversification Opportunities for Group 1 and ACV Auctions

0.84

Correlation Coefficient

Group 1  ACV Auctions

Very poor diversification

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

Pair Corralation between Group 1 and ACV Auctions

Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.85 times more return on investment than ACV Auctions. However, Group 1 Automotive is 1.17 times less risky than ACV Auctions. It trades about 0.13 of its potential returns per unit of risk. ACV Auctions is currently generating about 0.02 per unit of risk. If you would invest  36,429  in Group 1 Automotive on September 14, 2024 and sell it today you would earn a total of  6,281  from holding Group 1 Automotive or generate 17.24% return on investment over 90 days.

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

Group 1 Automotive  vs.  ACV Auctions

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.

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.

Pair Trading with Group 1 and ACV Auctions

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

The idea behind Group 1 Automotive and ACV Auctions 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.