Correlation Between Tile Shop and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both Tile Shop 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 Tile Shop and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tile Shop Holdings and Penske Automotive Group, you can compare the effects of market volatilities on Tile Shop 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 Tile Shop with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Penske Automotive.
Diversification Opportunities for Tile Shop and Penske Automotive
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tile and Penske is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and Tile Shop 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 Tile Shop Holdings 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 Tile Shop i.e., Tile Shop and Penske Automotive go up and down completely randomly.
Pair Corralation between Tile Shop and Penske Automotive
Given the investment horizon of 90 days Tile Shop Holdings is expected to generate 1.16 times more return on investment than Penske Automotive. However, Tile Shop is 1.16 times more volatile than Penske Automotive Group. It trades about 0.08 of its potential returns per unit of risk. Penske Automotive Group is currently generating about 0.03 per unit of risk. If you would invest 603.00 in Tile Shop Holdings on August 28, 2024 and sell it today you would earn a total of 55.00 from holding Tile Shop Holdings or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tile Shop Holdings vs. Penske Automotive Group
Performance |
| Timeline |
| Tile Shop Holdings |
| Penske Automotive |
Tile Shop and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tile Shop and Penske Automotive
The main advantage of trading using opposite Tile Shop and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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.| Tile Shop vs. Kingfisher PLC ADR | Tile Shop vs. Haverty Furniture Companies | Tile Shop vs. Arhaus Inc | Tile Shop vs. Kirklands |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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