Correlation Between Eagle Materials and PENN Entertainment
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and PENN Entertainment 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 Eagle Materials and PENN Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and PENN Entertainment, you can compare the effects of market volatilities on Eagle Materials and PENN Entertainment 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 Eagle Materials with a short position of PENN Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and PENN Entertainment.
Diversification Opportunities for Eagle Materials and PENN Entertainment
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eagle and PENN is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and PENN Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN Entertainment and Eagle Materials 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 Eagle Materials are associated (or correlated) with PENN Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN Entertainment has no effect on the direction of Eagle Materials i.e., Eagle Materials and PENN Entertainment go up and down completely randomly.
Pair Corralation between Eagle Materials and PENN Entertainment
Assuming the 90 days horizon Eagle Materials is expected to generate 0.63 times more return on investment than PENN Entertainment. However, Eagle Materials is 1.6 times less risky than PENN Entertainment. It trades about 0.03 of its potential returns per unit of risk. PENN Entertainment is currently generating about 0.02 per unit of risk. If you would invest 21,707 in Eagle Materials on November 1, 2024 and sell it today you would earn a total of 2,893 from holding Eagle Materials or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. PENN Entertainment
Performance |
| Timeline |
| Eagle Materials |
| PENN Entertainment |
Eagle Materials and PENN Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and PENN Entertainment
The main advantage of trading using opposite Eagle Materials and PENN Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, PENN Entertainment 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 Entertainment will offset losses from the drop in PENN Entertainment's long position.| Eagle Materials vs. VIVA WINE GROUP | Eagle Materials vs. Beta Systems Software | Eagle Materials vs. VITEC SOFTWARE GROUP | Eagle Materials vs. REGAL HOTEL INTL |
| PENN Entertainment vs. WESANA HEALTH HOLD | PENN Entertainment vs. VIVA WINE GROUP | PENN Entertainment vs. Allegheny Technologies Incorporated | PENN Entertainment vs. Cardinal Health |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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