Correlation Between PENSKE and Kontoor Brands

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

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

Diversification Opportunities for PENSKE and Kontoor Brands

-0.11

Correlation Coefficient

PENSKE  Kontoor Brands

Good diversification

The 3 months correlation between PENSKE and Kontoor is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding PENSKE AUTOMOTIVE GROUP and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and PENSKE 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 PENSKE AUTOMOTIVE GROUP are associated (or correlated) with Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of PENSKE i.e., PENSKE and Kontoor Brands go up and down completely randomly.

Pair Corralation between PENSKE and Kontoor Brands

Assuming the 90 days trading horizon PENSKE AUTOMOTIVE GROUP is expected to generate 0.26 times more return on investment than Kontoor Brands. However, PENSKE AUTOMOTIVE GROUP is 3.79 times less risky than Kontoor Brands. It trades about -0.17 of its potential returns per unit of risk. Kontoor Brands is currently generating about -0.24 per unit of risk. If you would invest  9,886  in PENSKE AUTOMOTIVE GROUP on September 29, 2024 and sell it today you would lose (132.00) from holding PENSKE AUTOMOTIVE GROUP or give up 1.34% of portfolio value over 90 days.

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

PENSKE AUTOMOTIVE GROUP  vs.  Kontoor Brands

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.

Kontoor Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kontoor Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PENSKE and Kontoor Brands

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

The idea behind PENSKE AUTOMOTIVE GROUP and Kontoor Brands 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.