Correlation Between Zumiez and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both Zumiez 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 Zumiez and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zumiez Inc and Penske Automotive Group, you can compare the effects of market volatilities on Zumiez 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 Zumiez with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zumiez and Penske Automotive.
Diversification Opportunities for Zumiez and Penske Automotive
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Zumiez and Penske is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and Zumiez 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 Zumiez Inc 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 Zumiez i.e., Zumiez and Penske Automotive go up and down completely randomly.
Pair Corralation between Zumiez and Penske Automotive
Given the investment horizon of 90 days Zumiez is expected to generate 2.0 times less return on investment than Penske Automotive. In addition to that, Zumiez is 1.77 times more volatile than Penske Automotive Group. It trades about 0.07 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zumiez Inc vs. Penske Automotive Group
Performance |
| Timeline |
| Zumiez Inc |
| Penske Automotive |
Zumiez and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zumiez and Penske Automotive
The main advantage of trading using opposite Zumiez and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez 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.The idea behind Zumiez Inc and Penske Automotive Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |