Correlation Between Leslies and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both Leslies 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 Leslies and Sonic Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leslies and Sonic Automotive, you can compare the effects of market volatilities on Leslies 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 Leslies with a short position of Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leslies and Sonic Automotive.
Diversification Opportunities for Leslies and Sonic Automotive
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leslies and Sonic is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Leslies and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive and Leslies 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 Leslies 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 Leslies i.e., Leslies and Sonic Automotive go up and down completely randomly.
Pair Corralation between Leslies and Sonic Automotive
Given the investment horizon of 90 days Leslies is expected to under-perform the Sonic Automotive. In addition to that, Leslies is 1.51 times more volatile than Sonic Automotive. It trades about -0.03 of its total potential returns per unit of risk. Sonic Automotive is currently generating about 0.21 per unit of volatility. If you would invest 6,416 in Sonic Automotive on October 25, 2024 and sell it today you would earn a total of 414.00 from holding Sonic Automotive or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leslies vs. Sonic Automotive
Performance |
| Timeline |
| Leslies |
| Sonic Automotive |
Leslies and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leslies and Sonic Automotive
The main advantage of trading using opposite Leslies and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leslies 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.| Leslies vs. Sally Beauty Holdings | Leslies vs. ODP Corp | Leslies vs. 1 800 FLOWERSCOM | Leslies vs. Caseys General Stores |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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