Correlation Between HE Equipment and PENSKE

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

By analyzing existing cross correlation between HE Equipment Services and PENSKE 57 01 FEB 28, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of PENSKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and PENSKE.

Diversification Opportunities for HE Equipment and PENSKE

-0.13

Correlation Coefficient

HE Equipment  PENSKE

Good diversification

The 3 months correlation between HEES and PENSKE is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and PENSKE 57 01 FEB 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENSKE 57 01 and HE Equipment 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 HE Equipment Services 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 57 01 has no effect on the direction of HE Equipment i.e., HE Equipment and PENSKE go up and down completely randomly.

Pair Corralation between HE Equipment and PENSKE

Given the investment horizon of 90 days HE Equipment Services is expected to generate 4.47 times more return on investment than PENSKE. However, HE Equipment is 4.47 times more volatile than PENSKE 57 01 FEB 28. It trades about 0.04 of its potential returns per unit of risk. PENSKE 57 01 FEB 28 is currently generating about -0.25 per unit of risk. If you would invest  4,784  in HE Equipment Services on September 27, 2024 and sell it today you would earn a total of  237.00  from holding HE Equipment Services or generate 4.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.08%
Values	Daily Returns

HE Equipment Services  vs.  PENSKE 57 01 FEB 28

HE Equipment Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PENSKE 57 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENSKE 57 01 FEB 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PENSKE 57 01 FEB 28 investors.

Pair Trading with HE Equipment and PENSKE

The main advantage of trading using opposite HE Equipment and PENSKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services and PENSKE 57 01 FEB 28 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.