Correlation Between SAN MIGUEL and Penske Automotive

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

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

Diversification Opportunities for SAN MIGUEL and Penske Automotive

0.22

Correlation Coefficient

SAN MIGUEL  Penske Automotive

Modest diversification

The 3 months correlation between SAN and Penske is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and SAN MIGUEL 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 SAN MIGUEL BREWERY 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 SAN MIGUEL i.e., SAN MIGUEL and Penske Automotive go up and down completely randomly.

Pair Corralation between SAN MIGUEL and Penske Automotive

Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to generate 2.19 times more return on investment than Penske Automotive. However, SAN MIGUEL is 2.19 times more volatile than Penske Automotive Group. It trades about 0.0 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  10.00  in SAN MIGUEL BREWERY on December 20, 2024 and sell it today you would lose (0.50) from holding SAN MIGUEL BREWERY or give up 5.0% of portfolio value over 90 days.

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

SAN MIGUEL BREWERY  vs.  Penske Automotive Group

SAN MIGUEL BREWERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL 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

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 SAN MIGUEL and Penske Automotive

The main advantage of trading using opposite SAN MIGUEL and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL 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 SAN MIGUEL BREWERY 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.