Correlation Between Penn National and GFL ENVIRONM

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

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

Diversification Opportunities for Penn National and GFL ENVIRONM

0.81

Correlation Coefficient

Penn National  GFL ENVIRONM

Very poor diversification

The 3 months correlation between Penn and GFL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and GFL ENVIRONM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL ENVIRONM and Penn National 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 National Gaming are associated (or correlated) with GFL ENVIRONM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFL ENVIRONM has no effect on the direction of Penn National i.e., Penn National and GFL ENVIRONM go up and down completely randomly.

Pair Corralation between Penn National and GFL ENVIRONM

Assuming the 90 days horizon Penn National is expected to generate 1.21 times less return on investment than GFL ENVIRONM. In addition to that, Penn National is 1.35 times more volatile than GFL ENVIRONM. It trades about 0.21 of its total potential returns per unit of risk. GFL ENVIRONM is currently generating about 0.35 per unit of volatility. If you would invest  3,820  in GFL ENVIRONM on September 3, 2024 and sell it today you would earn a total of  580.00  from holding GFL ENVIRONM or generate 15.18% return on investment over 90 days.

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

Penn National Gaming  vs.  GFL ENVIRONM

Penn National Gaming

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

GFL ENVIRONM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GFL ENVIRONM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GFL ENVIRONM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and GFL ENVIRONM

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

The idea behind Penn National Gaming and GFL ENVIRONM 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.