Correlation Between Penn National and TROPHY GAMES

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

Diversification Opportunities for Penn National and TROPHY GAMES

-0.53

Correlation Coefficient

Penn National  TROPHY GAMES

Excellent diversification

The 3 months correlation between Penn and TROPHY is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and TROPHY GAMES DEV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TROPHY GAMES DEV 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 TROPHY GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TROPHY GAMES DEV has no effect on the direction of Penn National i.e., Penn National and TROPHY GAMES go up and down completely randomly.

Pair Corralation between Penn National and TROPHY GAMES

Assuming the 90 days horizon Penn National Gaming is expected to generate 1.08 times more return on investment than TROPHY GAMES. However, Penn National is 1.08 times more volatile than TROPHY GAMES DEV. It trades about 0.13 of its potential returns per unit of risk. TROPHY GAMES DEV is currently generating about -0.02 per unit of risk. If you would invest  1,630  in Penn National Gaming on September 4, 2024 and sell it today you would earn a total of  354.00  from holding Penn National Gaming or generate 21.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Penn National Gaming  vs.  TROPHY GAMES DEV

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.

TROPHY GAMES DEV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TROPHY GAMES DEV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TROPHY GAMES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penn National and TROPHY GAMES

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

The idea behind Penn National Gaming and TROPHY GAMES DEV 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 Valuation module to check real value of public entities based on technical and fundamental data.