Correlation Between Sonic Automotive and Stoneridge
Can any of the company-specific risk be diversified away by investing in both Sonic Automotive and Stoneridge 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 Stoneridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonic Automotive and Stoneridge, you can compare the effects of market volatilities on Sonic Automotive and Stoneridge 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 Stoneridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Automotive and Stoneridge.
Diversification Opportunities for Sonic Automotive and Stoneridge
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sonic and Stoneridge is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Automotive and Stoneridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoneridge 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 Stoneridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoneridge has no effect on the direction of Sonic Automotive i.e., Sonic Automotive and Stoneridge go up and down completely randomly.
Pair Corralation between Sonic Automotive and Stoneridge
Considering the 90-day investment horizon Sonic Automotive is expected to generate 0.87 times more return on investment than Stoneridge. However, Sonic Automotive is 1.14 times less risky than Stoneridge. It trades about 0.04 of its potential returns per unit of risk. Stoneridge is currently generating about -0.07 per unit of risk. If you would invest 4,910 in Sonic Automotive on August 30, 2024 and sell it today you would earn a total of 2,083 from holding Sonic Automotive or generate 42.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonic Automotive vs. Stoneridge
Performance |
| Timeline |
| Sonic Automotive |
| Stoneridge |
Sonic Automotive and Stoneridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonic Automotive and Stoneridge
The main advantage of trading using opposite Sonic Automotive and Stoneridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonic Automotive position performs unexpectedly, Stoneridge 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 Stoneridge will offset losses from the drop in Stoneridge's long position.| Sonic Automotive vs. Lithia Motors | Sonic Automotive vs. AutoNation | Sonic Automotive vs. Asbury Automotive Group | Sonic Automotive vs. Penske Automotive Group |
| Stoneridge vs. Monro Muffler Brake | Stoneridge vs. Motorcar Parts of | Stoneridge vs. Standard Motor Products | Stoneridge vs. Douglas Dynamics |
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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