Correlation Between Group 1 and Rush Enterprises

Can any of the company-specific risk be diversified away by investing in both Group 1 and Rush Enterprises 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 Rush Enterprises 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 Rush Enterprises B, you can compare the effects of market volatilities on Group 1 and Rush Enterprises 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 Rush Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Rush Enterprises.

Diversification Opportunities for Group 1 and Rush Enterprises

0.94

Correlation Coefficient

Group 1  Rush Enterprises

Almost no diversification

The 3 months correlation between Group and Rush is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Rush Enterprises B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rush Enterprises B 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 Rush Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rush Enterprises B has no effect on the direction of Group 1 i.e., Group 1 and Rush Enterprises go up and down completely randomly.

Pair Corralation between Group 1 and Rush Enterprises

Considering the 90-day investment horizon Group 1 is expected to generate 1.04 times less return on investment than Rush Enterprises. But when comparing it to its historical volatility, Group 1 Automotive is 1.24 times less risky than Rush Enterprises. It trades about 0.13 of its potential returns per unit of risk. Rush Enterprises B is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,735  in Rush Enterprises B on September 15, 2024 and sell it today you would earn a total of  816.00  from holding Rush Enterprises B or generate 17.23% return on investment over 90 days.

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

Group 1 Automotive  vs.  Rush Enterprises B

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.

Rush Enterprises B

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rush Enterprises B are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical indicators, Rush Enterprises sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Group 1 and Rush Enterprises

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

The idea behind Group 1 Automotive and Rush Enterprises B 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.