Correlation Between Ishares Trust and PENSKE

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

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

Diversification Opportunities for Ishares Trust and PENSKE

-0.65

Correlation Coefficient

Ishares Trust  PENSKE

Excellent diversification

The 3 months correlation between Ishares and PENSKE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust and PENSKE AUTOMOTIVE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENSKE AUTOMOTIVE and Ishares Trust 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 Ishares Trust 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 Ishares Trust i.e., Ishares Trust and PENSKE go up and down completely randomly.

Pair Corralation between Ishares Trust and PENSKE

Given the investment horizon of 90 days Ishares Trust is expected to generate 4.58 times more return on investment than PENSKE. However, Ishares Trust is 4.58 times more volatile than PENSKE AUTOMOTIVE GROUP. It trades about 0.11 of its potential returns per unit of risk. PENSKE AUTOMOTIVE GROUP is currently generating about -0.07 per unit of risk. If you would invest  3,091  in Ishares Trust on September 24, 2024 and sell it today you would earn a total of  248.87  from holding Ishares Trust or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Ishares Trust   vs.  PENSKE AUTOMOTIVE GROUP

Ishares Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ishares Trust 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Trust and PENSKE

The main advantage of trading using opposite Ishares Trust and PENSKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Trust 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 Ishares Trust 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.