Correlation Between PENSKE and SunOpta

Can any of the company-specific risk be diversified away by investing in both PENSKE and SunOpta 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 SunOpta 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 SunOpta, you can compare the effects of market volatilities on PENSKE and SunOpta 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 SunOpta. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENSKE and SunOpta.

Diversification Opportunities for PENSKE and SunOpta

-0.36

Correlation Coefficient

PENSKE  SunOpta

Very good diversification

The 3 months correlation between PENSKE and SunOpta is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PENSKE AUTOMOTIVE GROUP and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta 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 SunOpta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunOpta has no effect on the direction of PENSKE i.e., PENSKE and SunOpta go up and down completely randomly.

Pair Corralation between PENSKE and SunOpta

Assuming the 90 days trading horizon PENSKE is expected to generate 324.5 times less return on investment than SunOpta. But when comparing it to its historical volatility, PENSKE AUTOMOTIVE GROUP is 7.99 times less risky than SunOpta. It trades about 0.0 of its potential returns per unit of risk. SunOpta is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  779.00  in SunOpta on September 27, 2024 and sell it today you would earn a total of  9.00  from holding SunOpta or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PENSKE AUTOMOTIVE GROUP  vs.  SunOpta

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.

SunOpta

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, SunOpta disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENSKE and SunOpta

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

The idea behind PENSKE AUTOMOTIVE GROUP and SunOpta 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 Global Correlations module to find global opportunities by holding instruments from different markets.