Correlation Between DTE Energy and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both DTE Energy 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 DTE Energy and Sonic Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DTE Energy and Sonic Automotive, you can compare the effects of market volatilities on DTE Energy 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 DTE Energy with a short position of Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and Sonic Automotive.
Diversification Opportunities for DTE Energy and Sonic Automotive
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between DTE and Sonic is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive and DTE Energy 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 DTE Energy 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 DTE Energy i.e., DTE Energy and Sonic Automotive go up and down completely randomly.
Pair Corralation between DTE Energy and Sonic Automotive
Considering the 90-day investment horizon DTE Energy is expected to under-perform the Sonic Automotive. But the stock apears to be less risky and, when comparing its historical volatility, DTE Energy is 3.06 times less risky than Sonic Automotive. The stock trades about -0.05 of its potential returns per unit of risk. The Sonic Automotive is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,995 in Sonic Automotive on September 2, 2024 and sell it today you would earn a total of 919.00 from holding Sonic Automotive or generate 15.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DTE Energy vs. Sonic Automotive
Performance |
| Timeline |
| DTE Energy |
| Sonic Automotive |
DTE Energy and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTE Energy and Sonic Automotive
The main advantage of trading using opposite DTE Energy and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy 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.| DTE Energy vs. Southern Company Series | DTE Energy vs. Southern Co | DTE Energy vs. DTE Energy Co | DTE Energy vs. Affiliated Managers Group, |
| Sonic Automotive vs. Lithia Motors | Sonic Automotive vs. AutoNation | Sonic Automotive vs. Asbury Automotive Group | Sonic Automotive vs. Penske 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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