Correlation Between Weyco and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both Weyco 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 Weyco and Sonic Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and Sonic Automotive, you can compare the effects of market volatilities on Weyco 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 Weyco with a short position of Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Sonic Automotive.
Diversification Opportunities for Weyco and Sonic Automotive
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Weyco and Sonic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive and Weyco 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 Weyco Group 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 Weyco i.e., Weyco and Sonic Automotive go up and down completely randomly.
Pair Corralation between Weyco and Sonic Automotive
Given the investment horizon of 90 days Weyco is expected to generate 2.43 times less return on investment than Sonic Automotive. In addition to that, Weyco is 1.56 times more volatile than Sonic Automotive. It trades about 0.07 of its total potential returns per unit of risk. Sonic Automotive is currently generating about 0.27 per unit of volatility. If you would invest 5,897 in Sonic Automotive on August 31, 2024 and sell it today you would earn a total of 1,096 from holding Sonic Automotive or generate 18.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weyco Group vs. Sonic Automotive
Performance |
| Timeline |
| Weyco Group |
| Sonic Automotive |
Weyco and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weyco and Sonic Automotive
The main advantage of trading using opposite Weyco and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco 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.The idea behind Weyco Group and Sonic Automotive pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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