Correlation Between Lowes Companies and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Penske Automotive Group, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Penske Automotive.
Diversification Opportunities for Lowes Companies and Penske Automotive
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lowes and Penske is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and Penske Automotive go up and down completely randomly.
Pair Corralation between Lowes Companies and Penske Automotive
Considering the 90-day investment horizon Lowes Companies is expected to under-perform the Penske Automotive. In addition to that, Lowes Companies is 1.08 times more volatile than Penske Automotive Group. It trades about -0.04 of its total potential returns per unit of risk. Penske Automotive Group is currently generating about 0.24 per unit of volatility. If you would invest 15,067 in Penske Automotive Group on August 24, 2024 and sell it today you would earn a total of 1,213 from holding Penske Automotive Group or generate 8.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Penske Automotive Group
Performance |
| Timeline |
| Lowes Companies |
| Penske Automotive |
Lowes Companies and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Penske Automotive
The main advantage of trading using opposite Lowes Companies and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
| Penske Automotive vs. Group 1 Automotive | 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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