Correlation Between AutoZone and Cazoo

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

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

Diversification Opportunities for AutoZone and Cazoo

0.19

Correlation Coefficient

AutoZone  Cazoo

Average diversification

The 3 months correlation between AutoZone and Cazoo is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Cazoo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cazoo Group and AutoZone 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 AutoZone 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 AutoZone i.e., AutoZone and Cazoo go up and down completely randomly.

Pair Corralation between AutoZone and Cazoo

Considering the 90-day investment horizon AutoZone is expected to under-perform the Cazoo. But the stock apears to be less risky and, when comparing its historical volatility, AutoZone is 22.98 times less risky than Cazoo. The stock trades about -0.25 of its potential returns per unit of risk. The Cazoo Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  906.00  in Cazoo Group on January 30, 2024 and sell it today you would earn a total of  283.00  from holding Cazoo Group or generate 31.24% return on investment over 90 days.

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

AutoZone  vs.  Cazoo Group

AutoZone

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoZone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cazoo Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cazoo Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Cazoo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AutoZone and Cazoo

The main advantage of trading using opposite AutoZone and Cazoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone 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 AutoZone 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.