Correlation Between Penn National and Tower Semiconductor

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

Diversification Opportunities for Penn National and Tower Semiconductor

0.74

Correlation Coefficient

Penn National  Tower Semiconductor

Poor diversification

The 3 months correlation between Penn and Tower is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Penn National i.e., Penn National and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Penn National and Tower Semiconductor

Assuming the 90 days horizon Penn National is expected to generate 10.45 times less return on investment than Tower Semiconductor. In addition to that, Penn National is 1.38 times more volatile than Tower Semiconductor. It trades about 0.0 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.03 per unit of volatility. If you would invest  3,709  in Tower Semiconductor on September 14, 2024 and sell it today you would earn a total of  930.00  from holding Tower Semiconductor or generate 25.07% return on investment over 90 days.

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

Penn National Gaming  vs.  Tower Semiconductor

Penn National Gaming

Risk-Adjusted Performance

3 of 100

OK

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

Tower Semiconductor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tower Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Tower Semiconductor

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

The idea behind Penn National Gaming and Tower Semiconductor 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..