Correlation Between Penske Automotive and USS
Can any of the company-specific risk be diversified away by investing in both Penske Automotive and USS 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 USS 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 USS Co, you can compare the effects of market volatilities on Penske Automotive and USS 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 USS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penske Automotive and USS.
Diversification Opportunities for Penske Automotive and USS
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Penske and USS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of Penske Automotive i.e., Penske Automotive and USS go up and down completely randomly.
Pair Corralation between Penske Automotive and USS
Assuming the 90 days horizon Penske Automotive Group is expected to generate 1.05 times more return on investment than USS. However, Penske Automotive is 1.05 times more volatile than USS Co. It trades about 0.06 of its potential returns per unit of risk. USS Co is currently generating about 0.05 per unit of risk. If you would invest 13,197 in Penske Automotive Group on October 13, 2024 and sell it today you would earn a total of 1,603 from holding Penske Automotive Group or generate 12.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penske Automotive Group vs. USS Co
Performance |
| Timeline |
| Penske Automotive |
| USS Co |
Penske Automotive and USS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penske Automotive and USS
The main advantage of trading using opposite Penske Automotive and USS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penske Automotive position performs unexpectedly, USS 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 USS will offset losses from the drop in USS's long position.| Penske Automotive vs. CONTAGIOUS GAMING INC | Penske Automotive vs. HOCHSCHILD MINING | Penske Automotive vs. QINGCI GAMES INC | Penske Automotive vs. International Game Technology |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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