Correlation Between PENN NATL and INNOVATEC SPA
Can any of the company-specific risk be diversified away by investing in both PENN NATL and INNOVATEC SPA 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 INNOVATEC SPA 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 INNOVATEC SPA, you can compare the effects of market volatilities on PENN NATL and INNOVATEC SPA 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 INNOVATEC SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and INNOVATEC SPA.
Diversification Opportunities for PENN NATL and INNOVATEC SPA
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PENN and INNOVATEC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and INNOVATEC SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOVATEC SPA 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 INNOVATEC SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOVATEC SPA has no effect on the direction of PENN NATL i.e., PENN NATL and INNOVATEC SPA go up and down completely randomly.
Pair Corralation between PENN NATL and INNOVATEC SPA
Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the INNOVATEC SPA. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 1.92 times less risky than INNOVATEC SPA. The stock trades about -0.09 of its potential returns per unit of risk. The INNOVATEC SPA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 81.00 in INNOVATEC SPA on September 12, 2024 and sell it today you would earn a total of 5.00 from holding INNOVATEC SPA or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PENN NATL GAMING vs. INNOVATEC SPA
Performance |
| Timeline |
| PENN NATL GAMING |
| INNOVATEC SPA |
PENN NATL and INNOVATEC SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and INNOVATEC SPA
The main advantage of trading using opposite PENN NATL and INNOVATEC SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, INNOVATEC SPA 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 INNOVATEC SPA will offset losses from the drop in INNOVATEC SPA's long position.The idea behind PENN NATL GAMING and INNOVATEC SPA 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.| INNOVATEC SPA vs. KENEDIX OFFICE INV | INNOVATEC SPA vs. PENN NATL GAMING | INNOVATEC SPA vs. GigaMedia | INNOVATEC SPA vs. FANDIFI TECHNOLOGY P |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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