Correlation Between Zhongsheng Group and Penske Automotive

Can any of the company-specific risk be diversified away by investing in both Zhongsheng Group 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 Zhongsheng Group and Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongsheng Group Holdings and Penske Automotive Group, you can compare the effects of market volatilities on Zhongsheng Group 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 Zhongsheng Group with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongsheng Group and Penske Automotive.

Diversification Opportunities for Zhongsheng Group and Penske Automotive

-0.45

Correlation Coefficient

Zhongsheng Group  Penske Automotive

Very good diversification

The 3 months correlation between Zhongsheng and Penske is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Zhongsheng Group 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 Zhongsheng Group 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 Zhongsheng Group 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 Zhongsheng Group i.e., Zhongsheng Group and Penske Automotive go up and down completely randomly.

Pair Corralation between Zhongsheng Group and Penske Automotive

Assuming the 90 days horizon Zhongsheng Group Holdings is expected to generate 1.56 times more return on investment than Penske Automotive. However, Zhongsheng Group is 1.56 times more volatile than Penske Automotive Group. It trades about 0.01 of its potential returns per unit of risk. Penske Automotive Group is currently generating about -0.07 per unit of risk. If you would invest  173.00  in Zhongsheng Group Holdings on December 30, 2024 and sell it today you would lose (1.00) from holding Zhongsheng Group Holdings or give up 0.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Zhongsheng Group Holdings  vs.  Penske Automotive Group

Zhongsheng Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhongsheng Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Zhongsheng Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Penske Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penske Automotive Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Zhongsheng Group and Penske Automotive

The main advantage of trading using opposite Zhongsheng Group and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongsheng Group 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 Zhongsheng Group Holdings 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.