Correlation Between Cazoo and Rush Enterprises

Can any of the company-specific risk be diversified away by investing in both Cazoo and Rush Enterprises 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 Cazoo and Rush Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cazoo Group and Rush Enterprises B, you can compare the effects of market volatilities on Cazoo and Rush Enterprises 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 Cazoo with a short position of Rush Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cazoo and Rush Enterprises.

Diversification Opportunities for Cazoo and Rush Enterprises

-0.51

Correlation Coefficient

Cazoo  Rush Enterprises

Excellent diversification

The 3 months correlation between Cazoo and Rush is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cazoo Group and Rush Enterprises B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rush Enterprises B and Cazoo 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 Cazoo Group are associated (or correlated) with Rush Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rush Enterprises B has no effect on the direction of Cazoo i.e., Cazoo and Rush Enterprises go up and down completely randomly.

Pair Corralation between Cazoo and Rush Enterprises

If you would invest  4,580  in Rush Enterprises B on September 12, 2024 and sell it today you would earn a total of  1,010  from holding Rush Enterprises B or generate 22.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Cazoo Group  vs.  Rush Enterprises B

Cazoo Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cazoo Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cazoo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Rush Enterprises B

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rush Enterprises B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical indicators, Rush Enterprises sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cazoo and Rush Enterprises

The main advantage of trading using opposite Cazoo and Rush Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cazoo position performs unexpectedly, Rush Enterprises 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 Rush Enterprises will offset losses from the drop in Rush Enterprises' long position.

The idea behind Cazoo Group and Rush Enterprises B 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.