Correlation Between Build A and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both Build A 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 Build A and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Build A Bear Workshop and Penske Automotive Group, you can compare the effects of market volatilities on Build A 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 Build A with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Penske Automotive.
Diversification Opportunities for Build A and Penske Automotive
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Build and Penske is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and Build A 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 Build A Bear Workshop 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 Build A i.e., Build A and Penske Automotive go up and down completely randomly.
Pair Corralation between Build A and Penske Automotive
Considering the 90-day investment horizon Build A Bear Workshop is expected to under-perform the Penske Automotive. In addition to that, Build A is 1.46 times more volatile than Penske Automotive Group. It trades about -0.01 of its total potential returns per unit of risk. Penske Automotive Group is currently generating about 0.29 per unit of volatility. If you would invest 15,450 in Penske Automotive Group on August 28, 2024 and sell it today you would earn a total of 1,588 from holding Penske Automotive Group or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. Penske Automotive Group
Performance |
| Timeline |
| Build A Bear |
| Penske Automotive |
Build A and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and Penske Automotive
The main advantage of trading using opposite Build A and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A 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.The idea behind Build A Bear Workshop and Penske Automotive 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.| Penske Automotive vs. Kingsway Financial Services | Penske Automotive vs. KAR Auction Services | Penske Automotive vs. Cango Inc | Penske Automotive vs. Vroom Inc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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