Correlation Between Sonic Automotive and Cazoo

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

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

Diversification Opportunities for Sonic Automotive and Cazoo

0.0

Correlation Coefficient

Sonic Automotive  Cazoo

Pay attention - limited upside

The 3 months correlation between Sonic and Cazoo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Automotive and Cazoo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cazoo Group 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 Cazoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cazoo Group has no effect on the direction of Sonic Automotive i.e., Sonic Automotive and Cazoo go up and down completely randomly.

Pair Corralation between Sonic Automotive and Cazoo

If you would invest (100.00) in Cazoo Group on December 17, 2024 and sell it today you would earn a total of  100.00  from holding Cazoo Group or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sonic Automotive  vs.  Cazoo Group

Sonic Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonic Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Cazoo Group

Risk-Adjusted Performance

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.

Pair Trading with Sonic Automotive and Cazoo

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

The idea behind Sonic Automotive and Cazoo Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.