Correlation Between Group 1 and Thomson Reuters
Can any of the company-specific risk be diversified away by investing in both Group 1 and Thomson Reuters 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 Thomson Reuters 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 Thomson Reuters, you can compare the effects of market volatilities on Group 1 and Thomson Reuters 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 Thomson Reuters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Thomson Reuters.
Diversification Opportunities for Group 1 and Thomson Reuters
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Group and Thomson is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Thomson Reuters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters 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 Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters has no effect on the direction of Group 1 i.e., Group 1 and Thomson Reuters go up and down completely randomly.
Pair Corralation between Group 1 and Thomson Reuters
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 1.6 times more return on investment than Thomson Reuters. However, Group 1 is 1.6 times more volatile than Thomson Reuters. It trades about 0.11 of its potential returns per unit of risk. Thomson Reuters is currently generating about 0.16 per unit of risk. If you would invest 37,552 in Group 1 Automotive on March 28, 2025 and sell it today you would earn a total of 5,431 from holding Group 1 Automotive or generate 14.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. Thomson Reuters
Performance |
| Timeline |
| Group 1 Automotive |
| Thomson Reuters |
Group 1 and Thomson Reuters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and Thomson Reuters
The main advantage of trading using opposite Group 1 and Thomson Reuters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Thomson Reuters 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 Thomson Reuters will offset losses from the drop in Thomson Reuters' long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| Thomson Reuters vs. Rentokil Initial PLC | Thomson Reuters vs. Cass Information Systems | Thomson Reuters vs. Maximus | Thomson Reuters vs. Aramark Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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