Correlation Between PENN NATL and PLAYMATES TOYS

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

By analyzing existing cross correlation between PENN NATL GAMING and PLAYMATES TOYS, you can compare the effects of market volatilities on PENN NATL and PLAYMATES TOYS 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 PENN NATL with a short position of PLAYMATES TOYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and PLAYMATES TOYS.

Diversification Opportunities for PENN NATL and PLAYMATES TOYS

-0.2

Correlation Coefficient

PENN NATL  PLAYMATES TOYS

Good diversification

The 3 months correlation between PENN and PLAYMATES is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS and PENN NATL 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 PENN NATL GAMING are associated (or correlated) with PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of PENN NATL i.e., PENN NATL and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between PENN NATL and PLAYMATES TOYS

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the PLAYMATES TOYS. In addition to that, PENN NATL is 1.28 times more volatile than PLAYMATES TOYS. It trades about -0.18 of its total potential returns per unit of risk. PLAYMATES TOYS is currently generating about 0.1 per unit of volatility. If you would invest  6.60  in PLAYMATES TOYS on September 27, 2024 and sell it today you would earn a total of  0.30  from holding PLAYMATES TOYS or generate 4.55% return on investment over 90 days.

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

PENN NATL GAMING  vs.  PLAYMATES TOYS

PENN NATL GAMING

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PLAYMATES TOYS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYMATES TOYS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PLAYMATES TOYS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PENN NATL and PLAYMATES TOYS

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

The idea behind PENN NATL GAMING and PLAYMATES TOYS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.