Correlation Between MPH Health and Penske Automotive

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

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

Diversification Opportunities for MPH Health and Penske Automotive

-0.18

Correlation Coefficient

MPH Health  Penske Automotive

Good diversification

The 3 months correlation between MPH and Penske is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and MPH Health 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 MPH Health Care 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 MPH Health i.e., MPH Health and Penske Automotive go up and down completely randomly.

Pair Corralation between MPH Health and Penske Automotive

Assuming the 90 days trading horizon MPH Health Care is expected to generate 1.42 times more return on investment than Penske Automotive. However, MPH Health is 1.42 times more volatile than Penske Automotive Group. It trades about 0.05 of its potential returns per unit of risk. Penske Automotive Group is currently generating about 0.04 per unit of risk. If you would invest  1,486  in MPH Health Care on October 23, 2024 and sell it today you would earn a total of  854.00  from holding MPH Health Care or generate 57.47% return on investment over 90 days.

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

MPH Health Care  vs.  Penske Automotive Group

MPH Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPH Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MPH Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Penske Automotive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penske Automotive Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penske Automotive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MPH Health and Penske Automotive

The main advantage of trading using opposite MPH Health and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPH Health 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 MPH Health Care 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.