Correlation Between Rush Enterprises and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both Rush Enterprises 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 Rush Enterprises and Sonic Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rush Enterprises B and Sonic Automotive, you can compare the effects of market volatilities on Rush Enterprises 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 Rush Enterprises with a short position of Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rush Enterprises and Sonic Automotive.
Diversification Opportunities for Rush Enterprises and Sonic Automotive
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rush and Sonic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rush Enterprises B and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive and Rush Enterprises 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 Rush Enterprises B 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 Rush Enterprises i.e., Rush Enterprises and Sonic Automotive go up and down completely randomly.
Pair Corralation between Rush Enterprises and Sonic Automotive
Assuming the 90 days horizon Rush Enterprises B is expected to generate 1.12 times more return on investment than Sonic Automotive. However, Rush Enterprises is 1.12 times more volatile than Sonic Automotive. It trades about 0.29 of its potential returns per unit of risk. Sonic Automotive is currently generating about 0.25 per unit of risk. If you would invest 4,692 in Rush Enterprises B on August 28, 2024 and sell it today you would earn a total of 1,047 from holding Rush Enterprises B or generate 22.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rush Enterprises B vs. Sonic Automotive
Performance |
| Timeline |
| Rush Enterprises B |
| Sonic Automotive |
Rush Enterprises and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rush Enterprises and Sonic Automotive
The main advantage of trading using opposite Rush Enterprises and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rush Enterprises 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.| Rush Enterprises vs. Sonic Automotive | Rush Enterprises vs. KAR Auction Services | Rush Enterprises vs. Kingsway Financial Services | Rush Enterprises vs. Asbury Automotive Group |
| Sonic Automotive vs. Kingsway Financial Services | Sonic Automotive vs. KAR Auction Services | Sonic Automotive vs. Cango Inc | Sonic Automotive vs. Vroom Inc |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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