Correlation Between Penske Automotive and WESANA HEALTH

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

Diversification Opportunities for Penske Automotive and WESANA HEALTH

0.0

Correlation Coefficient

Penske Automotive  WESANA HEALTH

Pay attention - limited upside

The 3 months correlation between Penske and WESANA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and WESANA HEALTH HOLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESANA HEALTH HOLD 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 WESANA HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESANA HEALTH HOLD has no effect on the direction of Penske Automotive i.e., Penske Automotive and WESANA HEALTH go up and down completely randomly.

Pair Corralation between Penske Automotive and WESANA HEALTH

Assuming the 90 days horizon Penske Automotive is expected to generate 77.2 times less return on investment than WESANA HEALTH. But when comparing it to its historical volatility, Penske Automotive Group is 31.67 times less risky than WESANA HEALTH. It trades about 0.04 of its potential returns per unit of risk. WESANA HEALTH HOLD is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.30  in WESANA HEALTH HOLD on October 23, 2024 and sell it today you would lose (2.15) from holding WESANA HEALTH HOLD or give up 93.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Penske Automotive Group  vs.  WESANA HEALTH HOLD

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.

WESANA HEALTH HOLD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESANA HEALTH HOLD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WESANA HEALTH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penske Automotive and WESANA HEALTH

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

The idea behind Penske Automotive Group and WESANA HEALTH HOLD 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.