Correlation Between Sonic Automotive and Aptiv PLC
Can any of the company-specific risk be diversified away by investing in both Sonic Automotive and Aptiv PLC 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 Sonic Automotive and Aptiv PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonic Automotive and Aptiv PLC, you can compare the effects of market volatilities on Sonic Automotive and Aptiv PLC 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 Sonic Automotive with a short position of Aptiv PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Automotive and Aptiv PLC.
Diversification Opportunities for Sonic Automotive and Aptiv PLC
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sonic and Aptiv is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Automotive and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC and Sonic Automotive 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 Sonic Automotive are associated (or correlated) with Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Sonic Automotive i.e., Sonic Automotive and Aptiv PLC go up and down completely randomly.
Pair Corralation between Sonic Automotive and Aptiv PLC
Considering the 90-day investment horizon Sonic Automotive is expected to generate 1.13 times more return on investment than Aptiv PLC. However, Sonic Automotive is 1.13 times more volatile than Aptiv PLC. It trades about 0.04 of its potential returns per unit of risk. Aptiv PLC is currently generating about -0.04 per unit of risk. If you would invest 4,850 in Sonic Automotive on August 28, 2024 and sell it today you would earn a total of 2,113 from holding Sonic Automotive or generate 43.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonic Automotive vs. Aptiv PLC
Performance |
| Timeline |
| Sonic Automotive |
| Aptiv PLC |
Sonic Automotive and Aptiv PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonic Automotive and Aptiv PLC
The main advantage of trading using opposite Sonic Automotive and Aptiv PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonic Automotive position performs unexpectedly, Aptiv PLC 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 Aptiv PLC will offset losses from the drop in Aptiv PLC's long position.| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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