Correlation Between SunCar Technology and CarGurus

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

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

Diversification Opportunities for SunCar Technology and CarGurus

-0.59

Correlation Coefficient

SunCar Technology  CarGurus

Excellent diversification

The 3 months correlation between SunCar and CarGurus is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SunCar Technology Group and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and SunCar Technology 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 SunCar Technology Group are associated (or correlated) with CarGurus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarGurus has no effect on the direction of SunCar Technology i.e., SunCar Technology and CarGurus go up and down completely randomly.

Pair Corralation between SunCar Technology and CarGurus

Considering the 90-day investment horizon SunCar Technology Group is expected to generate 4.35 times more return on investment than CarGurus. However, SunCar Technology is 4.35 times more volatile than CarGurus. It trades about 0.04 of its potential returns per unit of risk. CarGurus is currently generating about 0.08 per unit of risk. If you would invest  1,046  in SunCar Technology Group on October 1, 2024 and sell it today you would lose (89.00) from holding SunCar Technology Group or give up 8.51% of portfolio value over 90 days.

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

SunCar Technology Group  vs.  CarGurus

SunCar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunCar Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CarGurus

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CarGurus are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CarGurus reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunCar Technology and CarGurus

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

The idea behind SunCar Technology Group and CarGurus 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.