Correlation Between PENN NATL and British American
Can any of the company-specific risk be diversified away by investing in both PENN NATL and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on PENN NATL and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and British American.
Diversification Opportunities for PENN NATL and British American
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PENN and British is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of PENN NATL i.e., PENN NATL and British American go up and down completely randomly.
Pair Corralation between PENN NATL and British American
Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 3.39 times more return on investment than British American. However, PENN NATL is 3.39 times more volatile than British American Tobacco. It trades about 0.22 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.1 per unit of risk. If you would invest 1,769 in PENN NATL GAMING on October 20, 2024 and sell it today you would earn a total of 207.00 from holding PENN NATL GAMING or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
PENN NATL GAMING vs. British American Tobacco
Performance |
| Timeline |
| PENN NATL GAMING |
| British American Tobacco |
PENN NATL and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and British American
The main advantage of trading using opposite PENN NATL and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| PENN NATL vs. ITALIAN WINE BRANDS | PENN NATL vs. Zoom Video Communications | PENN NATL vs. FIH MOBILE | PENN NATL vs. Geely Automobile Holdings |
| British American vs. GigaMedia | British American vs. PENN NATL GAMING | British American vs. Tencent Music Entertainment | British American vs. Urban Outfitters |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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