Correlation Between Penske Automotive and Vroom, Common

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

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

Diversification Opportunities for Penske Automotive and Vroom, Common

-0.02

Correlation Coefficient

Penske Automotive  Vroom, Common

Good diversification

The 3 months correlation between Penske and Vroom, is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and Vroom, Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vroom, Common Stock and Penske Automotive 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 Penske Automotive Group are associated (or correlated) with Vroom, Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vroom, Common Stock has no effect on the direction of Penske Automotive i.e., Penske Automotive and Vroom, Common go up and down completely randomly.

Pair Corralation between Penske Automotive and Vroom, Common

Considering the 90-day investment horizon Penske Automotive Group is expected to under-perform the Vroom, Common. But the stock apears to be less risky and, when comparing its historical volatility, Penske Automotive Group is 29.34 times less risky than Vroom, Common. The stock trades about -0.01 of its potential returns per unit of risk. The Vroom, Common Stock is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  528.00  in Vroom, Common Stock on December 27, 2024 and sell it today you would earn a total of  2,323  from holding Vroom, Common Stock or generate 439.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Penske Automotive Group  vs.  Vroom, Common Stock

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 nearly stable basic indicators, Penske Automotive is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Vroom, Common Stock

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vroom, Common Stock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vroom, Common displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penske Automotive and Vroom, Common

The main advantage of trading using opposite Penske Automotive and Vroom, Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penske Automotive position performs unexpectedly, Vroom, Common 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 Vroom, Common will offset losses from the drop in Vroom, Common's long position.

The idea behind Penske Automotive Group and Vroom, Common Stock 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 Global Correlations module to find global opportunities by holding instruments from different markets.