Correlation Between Carvana and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both Carvana and Sonic 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 Carvana and Sonic Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carvana Co and Sonic Automotive, you can compare the effects of market volatilities on Carvana and Sonic 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 Carvana with a short position of Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carvana and Sonic Automotive.
Diversification Opportunities for Carvana and Sonic Automotive
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carvana and Sonic is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive and Carvana 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 Carvana Co are associated (or correlated) with Sonic Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Automotive has no effect on the direction of Carvana i.e., Carvana and Sonic Automotive go up and down completely randomly.
Pair Corralation between Carvana and Sonic Automotive
Given the investment horizon of 90 days Carvana Co is expected to generate 1.47 times more return on investment than Sonic Automotive. However, Carvana is 1.47 times more volatile than Sonic Automotive. It trades about 0.24 of its potential returns per unit of risk. Sonic Automotive is currently generating about 0.27 per unit of risk. If you would invest 19,734 in Carvana Co on August 24, 2024 and sell it today you would earn a total of 5,104 from holding Carvana Co or generate 25.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carvana Co vs. Sonic Automotive
Performance |
| Timeline |
| Carvana |
| Sonic Automotive |
Carvana and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carvana and Sonic Automotive
The main advantage of trading using opposite Carvana and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana position performs unexpectedly, Sonic 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 Sonic Automotive will offset losses from the drop in Sonic Automotive's long position.| Carvana vs. CarMax Inc | Carvana vs. U Power Limited | Carvana vs. SunCar Technology Group | Carvana vs. Jiuzi Holdings |
| Sonic Automotive vs. Group 1 Automotive | Sonic Automotive vs. AutoNation | Sonic Automotive vs. Asbury Automotive Group |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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