Correlation Between Macys and Penske Automotive

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

By analyzing existing cross correlation between Macys Inc and Penske Automotive Group, you can compare the effects of market volatilities on Macys and Penske Automotive 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 Macys with a short position of Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Penske Automotive.

Diversification Opportunities for Macys and Penske Automotive

0.38

Correlation Coefficient

Macys  Penske Automotive

Weak diversification

The 3 months correlation between Macys and Penske is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive and Macys 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 Macys Inc are associated (or correlated) with Penske Automotive. 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 Macys i.e., Macys and Penske Automotive go up and down completely randomly.

Pair Corralation between Macys and Penske Automotive

Taking into account the 90-day investment horizon Macys is expected to generate 2.89 times less return on investment than Penske Automotive. In addition to that, Macys is 1.7 times more volatile than Penske Automotive Group. It trades about 0.01 of its total potential returns per unit of risk. Penske Automotive Group is currently generating about 0.05 per unit of volatility. If you would invest  11,038  in Penske Automotive Group on September 29, 2024 and sell it today you would earn a total of  4,656  from holding Penske Automotive Group or generate 42.18% return on investment over 90 days.

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

Macys Inc  vs.  Penske Automotive Group

Macys Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Penske Automotive is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Macys and Penske Automotive

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

The idea behind Macys Inc 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.