Correlation Between PENN NATL and GAMING FAC
Can any of the company-specific risk be diversified away by investing in both PENN NATL and GAMING FAC 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 GAMING FAC 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 GAMING FAC SA, you can compare the effects of market volatilities on PENN NATL and GAMING FAC 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 GAMING FAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and GAMING FAC.
Diversification Opportunities for PENN NATL and GAMING FAC
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PENN and GAMING is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and GAMING FAC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMING FAC SA 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 GAMING FAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMING FAC SA has no effect on the direction of PENN NATL i.e., PENN NATL and GAMING FAC go up and down completely randomly.
Pair Corralation between PENN NATL and GAMING FAC
Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.11 times more return on investment than GAMING FAC. However, PENN NATL is 1.11 times more volatile than GAMING FAC SA. It trades about 0.01 of its potential returns per unit of risk. GAMING FAC SA is currently generating about -0.04 per unit of risk. If you would invest 1,764 in PENN NATL GAMING on September 21, 2024 and sell it today you would lose (28.00) from holding PENN NATL GAMING or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN NATL GAMING vs. GAMING FAC SA
Performance |
| Timeline |
| PENN NATL GAMING |
| GAMING FAC SA |
PENN NATL and GAMING FAC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and GAMING FAC
The main advantage of trading using opposite PENN NATL and GAMING FAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, GAMING FAC 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 GAMING FAC will offset losses from the drop in GAMING FAC's long position.The idea behind PENN NATL GAMING and GAMING FAC SA 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.| GAMING FAC vs. Kaufman Broad SA | GAMING FAC vs. Sanyo Chemical Industries | GAMING FAC vs. BROADWIND ENRGY | GAMING FAC vs. Soken Chemical Engineering |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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