Correlation Between KAR Auction and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both KAR Auction 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 KAR Auction and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAR Auction Services and Penske Automotive Group, you can compare the effects of market volatilities on KAR Auction 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 KAR Auction with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Penske Automotive.
Diversification Opportunities for KAR Auction and Penske Automotive
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KAR and Penske is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and KAR Auction 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 KAR Auction Services 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 KAR Auction i.e., KAR Auction and Penske Automotive go up and down completely randomly.
Pair Corralation between KAR Auction and Penske Automotive
Considering the 90-day investment horizon KAR Auction Services is expected to under-perform the Penske Automotive. In addition to that, KAR Auction is 1.13 times more volatile than Penske Automotive Group. It trades about -0.03 of its total potential returns per unit of risk. Penske Automotive Group is currently generating about 0.11 per unit of volatility. If you would invest 15,700 in Penske Automotive Group on October 20, 2024 and sell it today you would earn a total of 350.00 from holding Penske Automotive Group or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. Penske Automotive Group
Performance |
| Timeline |
| KAR Auction Services |
| Penske Automotive |
KAR Auction and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Penske Automotive
The main advantage of trading using opposite KAR Auction and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction 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.| KAR Auction vs. CarGurus | KAR Auction vs. Kingsway Financial Services | KAR Auction vs. Driven Brands Holdings | KAR Auction vs. Group 1 Automotive |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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