Correlation Between Penske Automotive and T.J. Maxx
Can any of the company-specific risk be diversified away by investing in both Penske Automotive and T.J. Maxx 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 Penske Automotive and T.J. Maxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penske Automotive Group and The TJX Companies, you can compare the effects of market volatilities on Penske Automotive and T.J. Maxx 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 Penske Automotive with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penske Automotive and T.J. Maxx.
Diversification Opportunities for Penske Automotive and T.J. Maxx
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Penske and T.J. is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Penske Automotive 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 Penske Automotive Group are associated (or correlated) with T.J. Maxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TJX Companies has no effect on the direction of Penske Automotive i.e., Penske Automotive and T.J. Maxx go up and down completely randomly.
Pair Corralation between Penske Automotive and T.J. Maxx
Considering the 90-day investment horizon Penske Automotive is expected to generate 1.1 times less return on investment than T.J. Maxx. In addition to that, Penske Automotive is 1.79 times more volatile than The TJX Companies. It trades about 0.27 of its total potential returns per unit of risk. The TJX Companies is currently generating about 0.53 per unit of volatility. If you would invest 11,376 in The TJX Companies on August 30, 2024 and sell it today you would earn a total of 1,260 from holding The TJX Companies or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penske Automotive Group vs. The TJX Companies
Performance |
| Timeline |
| Penske Automotive |
| TJX Companies |
Penske Automotive and T.J. Maxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penske Automotive and T.J. Maxx
The main advantage of trading using opposite Penske Automotive and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penske Automotive position performs unexpectedly, T.J. Maxx 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 T.J. Maxx will offset losses from the drop in T.J. Maxx's long position.| Penske Automotive vs. Group 1 Automotive | Penske Automotive vs. Lithia Motors | Penske Automotive vs. AutoNation | Penske Automotive vs. Asbury Automotive Group |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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