Correlation Between Cazoo and AutoNation

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

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

Diversification Opportunities for Cazoo and AutoNation

0.37

Correlation Coefficient

Cazoo  AutoNation

Weak diversification

The 3 months correlation between Cazoo and AutoNation is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cazoo Group and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation 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 AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Cazoo i.e., Cazoo and AutoNation go up and down completely randomly.

Pair Corralation between Cazoo and AutoNation

If you would invest  1.00  in Cazoo Group on August 11, 2024 and sell it today you would earn a total of  0.00  from holding Cazoo Group or generate 0.0% return on investment over 90 days.

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

Cazoo Group  vs.  AutoNation

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.

AutoNation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cazoo and AutoNation

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

The idea behind Cazoo Group and AutoNation 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.