Correlation Between Cazoo and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both Cazoo 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 Cazoo and Sonic Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cazoo Group and Sonic Automotive, you can compare the effects of market volatilities on Cazoo 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 Cazoo with a short position of Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cazoo and Sonic Automotive.
Diversification Opportunities for Cazoo and Sonic Automotive
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cazoo and Sonic is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cazoo Group and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive and Cazoo 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 Cazoo Group 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 Cazoo i.e., Cazoo and Sonic Automotive go up and down completely randomly.
Pair Corralation between Cazoo and Sonic Automotive
If you would invest 5,547 in Sonic Automotive on August 24, 2024 and sell it today you would earn a total of 1,105 from holding Sonic Automotive or generate 19.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.35% |
| Values | Daily Returns |
Cazoo Group vs. Sonic Automotive
Performance |
| Timeline |
| Cazoo Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Sonic Automotive |
Cazoo and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cazoo and Sonic Automotive
The main advantage of trading using opposite Cazoo and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cazoo 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.The idea behind Cazoo Group and Sonic Automotive 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.| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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