Correlation Between COSTCO WHOLESALE and Penn National
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE 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 COSTCO WHOLESALE and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSTCO WHOLESALE CDR and Penn National Gaming, you can compare the effects of market volatilities on COSTCO WHOLESALE 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 COSTCO WHOLESALE with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and Penn National.
Diversification Opportunities for COSTCO WHOLESALE and Penn National
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between COSTCO and Penn is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Penn National go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and Penn National
Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 13.39 times less return on investment than Penn National. But when comparing it to its historical volatility, COSTCO WHOLESALE CDR is 2.51 times less risky than Penn National. It trades about 0.04 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,781 in Penn National Gaming on October 25, 2024 and sell it today you would earn a total of 192.00 from holding Penn National Gaming or generate 10.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSTCO WHOLESALE CDR vs. Penn National Gaming
Performance |
| Timeline |
| COSTCO WHOLESALE CDR |
| Penn National Gaming |
COSTCO WHOLESALE and Penn National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSTCO WHOLESALE and Penn National
The main advantage of trading using opposite COSTCO WHOLESALE and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE 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.| COSTCO WHOLESALE vs. Compagnie Plastic Omnium | COSTCO WHOLESALE vs. Carnegie Clean Energy | COSTCO WHOLESALE vs. Aristocrat Leisure Limited | COSTCO WHOLESALE vs. Clean Energy Fuels |
| Penn National vs. Nufarm Limited | Penn National vs. TITAN MACHINERY | Penn National vs. DAIRY FARM INTL | Penn National vs. Tokyu Construction Co |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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