Correlation Between PENN NATL and Penn National

Can any of the company-specific risk be diversified away by investing in both PENN NATL 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 PENN NATL and Penn National 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 Penn National Gaming, you can compare the effects of market volatilities on PENN NATL 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 PENN NATL with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Penn National.

Diversification Opportunities for PENN NATL and Penn National

0.94

Correlation Coefficient

PENN NATL  Penn National

Almost no diversification

The 3 months correlation between PENN and Penn is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING 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 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 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 PENN NATL i.e., PENN NATL and Penn National go up and down completely randomly.

Pair Corralation between PENN NATL and Penn National

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 0.94 times more return on investment than Penn National. However, PENN NATL GAMING is 1.06 times less risky than Penn National. It trades about 0.01 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.01 per unit of risk. If you would invest  2,188  in PENN NATL GAMING on September 4, 2024 and sell it today you would lose (149.00) from holding PENN NATL GAMING or give up 6.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

PENN NATL GAMING  vs.  Penn National Gaming

PENN NATL GAMING

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Penn National Gaming

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and Penn National

The main advantage of trading using opposite PENN NATL and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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 PENN NATL GAMING 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.