Correlation Between United Utilities and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Penske Automotive Group, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Penske Automotive.
Diversification Opportunities for United Utilities and Penske Automotive
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Penske is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and United Utilities 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 United Utilities Group 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 United Utilities i.e., United Utilities and Penske Automotive go up and down completely randomly.
Pair Corralation between United Utilities and Penske Automotive
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Penske Automotive. In addition to that, United Utilities is 1.8 times more volatile than Penske Automotive Group. It trades about -0.15 of its total potential returns per unit of risk. Penske Automotive Group is currently generating about 0.13 per unit of volatility. If you would invest 15,000 in Penske Automotive Group on October 23, 2024 and sell it today you would earn a total of 400.00 from holding Penske Automotive Group or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Penske Automotive Group
Performance |
| Timeline |
| United Utilities |
| Penske Automotive |
United Utilities and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Penske Automotive
The main advantage of trading using opposite United Utilities and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. The Home Depot | United Utilities vs. Beazer Homes USA | United Utilities vs. OFFICE DEPOT | United Utilities vs. Addus HomeCare |
| Penske Automotive vs. KENEDIX OFFICE INV | Penske Automotive vs. Wizz Air Holdings | Penske Automotive vs. United Utilities Group | Penske Automotive vs. Entravision Communications |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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