Correlation Between Sonic Automotive and Camping World

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

By analyzing existing cross correlation between Sonic Automotive and Camping World Holdings, you can compare the effects of market volatilities on Sonic Automotive and Camping World 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 Camping World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Automotive and Camping World.

Diversification Opportunities for Sonic Automotive and Camping World

0.52

Correlation Coefficient

Sonic Automotive  Camping World

Very weak diversification

The 3 months correlation between Sonic and Camping is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Automotive and Camping World Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camping World Holdings 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 Camping World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camping World Holdings has no effect on the direction of Sonic Automotive i.e., Sonic Automotive and Camping World go up and down completely randomly.

Pair Corralation between Sonic Automotive and Camping World

Considering the 90-day investment horizon Sonic Automotive is expected to generate 0.84 times more return on investment than Camping World. However, Sonic Automotive is 1.18 times less risky than Camping World. It trades about 0.04 of its potential returns per unit of risk. Camping World Holdings is currently generating about -0.01 per unit of risk. If you would invest  5,132  in Sonic Automotive on September 12, 2024 and sell it today you would earn a total of  1,591  from holding Sonic Automotive or generate 31.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sonic Automotive  vs.  Camping World Holdings

Sonic Automotive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonic Automotive are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Sonic Automotive demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Camping World Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Camping World Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Camping World demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonic Automotive and Camping World

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

The idea behind Sonic Automotive and Camping World Holdings 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.