Correlation Between Penske Automotive and DIeteren Group

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

Diversification Opportunities for Penske Automotive and DIeteren Group

0.51

Correlation Coefficient

Penske Automotive  DIeteren Group

Very weak diversification

The 3 months correlation between Penske and DIeteren is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and DIeteren Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIeteren Group SA 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 DIeteren Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIeteren Group SA has no effect on the direction of Penske Automotive i.e., Penske Automotive and DIeteren Group go up and down completely randomly.

Pair Corralation between Penske Automotive and DIeteren Group

Assuming the 90 days horizon Penske Automotive is expected to generate 3.12 times less return on investment than DIeteren Group. But when comparing it to its historical volatility, Penske Automotive Group is 2.27 times less risky than DIeteren Group. It trades about 0.13 of its potential returns per unit of risk. DIeteren Group SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,406  in DIeteren Group SA on September 22, 2024 and sell it today you would earn a total of  3,584  from holding DIeteren Group SA or generate 28.89% return on investment over 90 days.

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

Penske Automotive Group  vs.  DIeteren Group SA

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.

DIeteren Group SA

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Penske Automotive and DIeteren Group

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

The idea behind Penske Automotive Group and DIeteren Group SA 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.