Correlation Between Snap and CarGurus
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and CarGurus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and CarGurus, you can compare the effects of market volatilities on Snap 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 Snap with a short position of CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and CarGurus.
Diversification Opportunities for Snap and CarGurus
Pay attention - limited upside
The 3 months correlation between Snap and CarGurus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus and Snap 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 Snap Inc 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 Snap i.e., Snap and CarGurus go up and down completely randomly.
Pair Corralation between Snap and CarGurus
Given the investment horizon of 90 days Snap Inc is expected to generate 1.94 times more return on investment than CarGurus. However, Snap is 1.94 times more volatile than CarGurus. It trades about 0.14 of its potential returns per unit of risk. CarGurus is currently generating about 0.04 per unit of risk. If you would invest 1,140 in Snap Inc on February 14, 2024 and sell it today you would earn a total of 436.00 from holding Snap Inc or generate 38.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. CarGurus
Performance |
| Timeline |
| Snap Inc |
| CarGurus |
Snap and CarGurus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and CarGurus
The main advantage of trading using opposite Snap and CarGurus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc 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.| CarGurus vs. Group 1 Automotive | CarGurus vs. KAR Auction Services | CarGurus vs. CarMax Inc | CarGurus vs. ACV Auctions |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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