Correlation Between Penske Automotive and Zhongsheng Group

Can any of the company-specific risk be diversified away by investing in both Penske Automotive and Zhongsheng Group 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 Zhongsheng Group 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 Zhongsheng Group Holdings, you can compare the effects of market volatilities on Penske Automotive and Zhongsheng Group 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 Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penske Automotive and Zhongsheng Group.

Diversification Opportunities for Penske Automotive and Zhongsheng Group

0.76

Correlation Coefficient

Penske Automotive  Zhongsheng Group

Poor diversification

The 3 months correlation between Penske and Zhongsheng is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings 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 Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of Penske Automotive i.e., Penske Automotive and Zhongsheng Group go up and down completely randomly.

Pair Corralation between Penske Automotive and Zhongsheng Group

Assuming the 90 days horizon Penske Automotive Group is expected to generate 0.44 times more return on investment than Zhongsheng Group. However, Penske Automotive Group is 2.25 times less risky than Zhongsheng Group. It trades about -0.04 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about -0.18 per unit of risk. If you would invest  15,200  in Penske Automotive Group on September 23, 2024 and sell it today you would lose (200.00) from holding Penske Automotive Group or give up 1.32% of portfolio value over 90 days.

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

Penske Automotive Group  vs.  Zhongsheng Group Holdings

Penske Automotive

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penske Automotive Group are ranked lower than 6 (%) 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 January 2025.

Zhongsheng Group Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penske Automotive and Zhongsheng Group

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

The idea behind Penske Automotive Group and Zhongsheng Group Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.