Correlation Between Penske Automotive and DeVry Education

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

Diversification Opportunities for Penske Automotive and DeVry Education

0.83

Correlation Coefficient

Penske Automotive  DeVry Education

Very poor diversification

The 3 months correlation between Penske and DeVry is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group and DeVry Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeVry Education Group 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 DeVry Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeVry Education Group has no effect on the direction of Penske Automotive i.e., Penske Automotive and DeVry Education go up and down completely randomly.

Pair Corralation between Penske Automotive and DeVry Education

Assuming the 90 days horizon Penske Automotive Group is expected to under-perform the DeVry Education. But the stock apears to be less risky and, when comparing its historical volatility, Penske Automotive Group is 2.36 times less risky than DeVry Education. The stock trades about -0.47 of its potential returns per unit of risk. The DeVry Education Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,600  in DeVry Education Group on October 9, 2024 and sell it today you would earn a total of  400.00  from holding DeVry Education Group or generate 4.65% return on investment over 90 days.

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

Penske Automotive Group  vs.  DeVry Education Group

Penske Automotive

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penske Automotive Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penske Automotive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DeVry Education Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penske Automotive and DeVry Education

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

The idea behind Penske Automotive Group and DeVry Education 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..