Correlation Between ABM Industries and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both ABM Industries and Penske Automotive 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 ABM Industries and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABM Industries Incorporated and Penske Automotive Group, you can compare the effects of market volatilities on ABM Industries and Penske Automotive 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 ABM Industries with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and Penske Automotive.
Diversification Opportunities for ABM Industries and Penske Automotive
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABM and Penske is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and ABM Industries 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 ABM Industries Incorporated are associated (or correlated) with Penske Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penske Automotive has no effect on the direction of ABM Industries i.e., ABM Industries and Penske Automotive go up and down completely randomly.
Pair Corralation between ABM Industries and Penske Automotive
Considering the 90-day investment horizon ABM Industries is expected to generate 1.31 times less return on investment than Penske Automotive. In addition to that, ABM Industries is 1.09 times more volatile than Penske Automotive Group. It trades about 0.02 of its total potential returns per unit of risk. Penske Automotive Group is currently generating about 0.03 per unit of volatility. If you would invest 13,458 in Penske Automotive Group on November 1, 2024 and sell it today you would earn a total of 3,363 from holding Penske Automotive Group or generate 24.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABM Industries Incorporated vs. Penske Automotive Group
Performance |
| Timeline |
| ABM Industries |
| Penske Automotive |
ABM Industries and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABM Industries and Penske Automotive
The main advantage of trading using opposite ABM Industries and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries position performs unexpectedly, Penske Automotive 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 Penske Automotive will offset losses from the drop in Penske Automotive's long position.| ABM Industries vs. Cass Information Systems | ABM Industries vs. First Advantage Corp | ABM Industries vs. Rentokil Initial PLC | ABM Industries vs. CBIZ Inc |
| Penske Automotive vs. Group 1 Automotive | Penske Automotive vs. Lithia Motors | Penske Automotive vs. AutoNation | Penske Automotive vs. Asbury Automotive Group |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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