Correlation Between SOFR and PENSKE

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

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

Diversification Opportunities for SOFR and PENSKE

-0.56

Correlation Coefficient

SOFR  PENSKE

Excellent diversification

The 3 months correlation between SOFR and PENSKE is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and PENSKE AUTOMOTIVE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENSKE AUTOMOTIVE and SOFR 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 SOFR 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 SOFR i.e., SOFR and PENSKE go up and down completely randomly.

Pair Corralation between SOFR and PENSKE

Given the investment horizon of 90 days SOFR is expected to generate 0.14 times more return on investment than PENSKE. However, SOFR is 7.23 times less risky than PENSKE. It trades about 0.37 of its potential returns per unit of risk. PENSKE AUTOMOTIVE GROUP is currently generating about -0.2 per unit of risk. If you would invest  10,012  in SOFR on September 24, 2024 and sell it today you would earn a total of  38.00  from holding SOFR or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

SOFR  vs.  PENSKE AUTOMOTIVE GROUP

SOFR

Risk-Adjusted Performance

13 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, SOFR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 SOFR and PENSKE

The main advantage of trading using opposite SOFR and PENSKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOFR 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 SOFR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.