Correlation Between PENN NATL and Healthequity

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Can any of the company-specific risk be diversified away by investing in both PENN NATL and Healthequity 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 NATL and Healthequity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN NATL GAMING and Healthequity, you can compare the effects of market volatilities on PENN NATL and Healthequity 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 NATL with a short position of Healthequity. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Healthequity.

Diversification Opportunities for PENN NATL and Healthequity

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between PENN and Healthequity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Healthequity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthequity and PENN NATL 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 NATL GAMING are associated (or correlated) with Healthequity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthequity has no effect on the direction of PENN NATL i.e., PENN NATL and Healthequity go up and down completely randomly.

Pair Corralation between PENN NATL and Healthequity

Assuming the 90 days trading horizon PENN NATL is expected to generate 5.7 times less return on investment than Healthequity. In addition to that, PENN NATL is 1.51 times more volatile than Healthequity. It trades about 0.01 of its total potential returns per unit of risk. Healthequity is currently generating about 0.09 per unit of volatility. If you would invest  5,950  in Healthequity on September 1, 2024 and sell it today you would earn a total of  3,700  from holding Healthequity or generate 62.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.64%
ValuesDaily Returns

PENN NATL GAMING  vs.  Healthequity

 Performance 
       Timeline  
PENN NATL GAMING 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.
Healthequity 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Healthequity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Healthequity reported solid returns over the last few months and may actually be approaching a breakup point.

PENN NATL and Healthequity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PENN NATL and Healthequity

The main advantage of trading using opposite PENN NATL and Healthequity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, Healthequity 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 Healthequity will offset losses from the drop in Healthequity's long position.
The idea behind PENN NATL GAMING and Healthequity 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.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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