Correlation Between PULSION Medical and Penske Automotive

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

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

Diversification Opportunities for PULSION Medical and Penske Automotive

0.59

Correlation Coefficient

PULSION Medical  Penske Automotive

Very weak diversification

The 3 months correlation between PULSION and Penske is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PULSION Medical Systems and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and PULSION Medical 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 PULSION Medical Systems 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 PULSION Medical i.e., PULSION Medical and Penske Automotive go up and down completely randomly.

Pair Corralation between PULSION Medical and Penske Automotive

Assuming the 90 days trading horizon PULSION Medical Systems is expected to generate 0.26 times more return on investment than Penske Automotive. However, PULSION Medical Systems is 3.87 times less risky than Penske Automotive. It trades about 0.02 of its potential returns per unit of risk. Penske Automotive Group is currently generating about -0.06 per unit of risk. If you would invest  1,620  in PULSION Medical Systems on December 22, 2024 and sell it today you would earn a total of  10.00  from holding PULSION Medical Systems or generate 0.62% return on investment over 90 days.

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

PULSION Medical Systems  vs.  Penske Automotive Group

PULSION Medical Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PULSION Medical Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PULSION Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PULSION Medical and Penske Automotive

The main advantage of trading using opposite PULSION Medical and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PULSION Medical 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 PULSION Medical Systems 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.