Correlation Between GAMING FAC and Penn National

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

By analyzing existing cross correlation between GAMING FAC SA and Penn National Gaming, you can compare the effects of market volatilities on GAMING FAC and Penn National 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 GAMING FAC with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMING FAC and Penn National.

Diversification Opportunities for GAMING FAC and Penn National

-0.57

Correlation Coefficient

GAMING FAC  Penn National

Excellent diversification

The 3 months correlation between GAMING and Penn is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and GAMING FAC 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 GAMING FAC SA are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of GAMING FAC i.e., GAMING FAC and Penn National go up and down completely randomly.

Pair Corralation between GAMING FAC and Penn National

Assuming the 90 days horizon GAMING FAC SA is expected to under-perform the Penn National. In addition to that, GAMING FAC is 1.29 times more volatile than Penn National Gaming. It trades about -0.06 of its total potential returns per unit of risk. Penn National Gaming is currently generating about 0.01 per unit of volatility. If you would invest  1,737  in Penn National Gaming on September 24, 2024 and sell it today you would lose (1.00) from holding Penn National Gaming or give up 0.06% of portfolio value over 90 days.

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

GAMING FAC SA  vs.  Penn National Gaming

GAMING FAC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMING FAC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penn National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GAMING FAC and Penn National

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

The idea behind GAMING FAC SA and Penn National Gaming 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.