Correlation Between Employers Holdings and PENSKE

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

By analyzing existing cross correlation between Employers Holdings and PENSKE AUTOMOTIVE GROUP, you can compare the effects of market volatilities on Employers Holdings and PENSKE 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 Employers Holdings with a short position of PENSKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and PENSKE.

Diversification Opportunities for Employers Holdings and PENSKE

-0.13

Correlation Coefficient

Employers Holdings  PENSKE

Good diversification

The 3 months correlation between Employers and PENSKE is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and PENSKE AUTOMOTIVE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENSKE AUTOMOTIVE and Employers Holdings 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 Employers Holdings are associated (or correlated) with PENSKE. 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 Employers Holdings i.e., Employers Holdings and PENSKE go up and down completely randomly.

Pair Corralation between Employers Holdings and PENSKE

Considering the 90-day investment horizon Employers Holdings is expected to under-perform the PENSKE. In addition to that, Employers Holdings is 2.19 times more volatile than PENSKE AUTOMOTIVE GROUP. It trades about -0.17 of its total potential returns per unit of risk. PENSKE AUTOMOTIVE GROUP is currently generating about -0.12 per unit of volatility. If you would invest  9,875  in PENSKE AUTOMOTIVE GROUP on September 27, 2024 and sell it today you would lose (121.00) from holding PENSKE AUTOMOTIVE GROUP or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Employers Holdings  vs.  PENSKE AUTOMOTIVE GROUP

Employers Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PENSKE AUTOMOTIVE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENSKE AUTOMOTIVE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PENSKE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Employers Holdings and PENSKE

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

The idea behind Employers Holdings 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.