Correlation Between PENN NATL and Coca Cola
Can any of the company-specific risk be diversified away by investing in both PENN NATL and Coca Cola 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 Coca Cola 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 Coca Cola European Partners, you can compare the effects of market volatilities on PENN NATL and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Coca Cola.
Diversification Opportunities for PENN NATL and Coca Cola
Modest diversification
The 3 months correlation between PENN and Coca is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Coca Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola European 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola European has no effect on the direction of PENN NATL i.e., PENN NATL and Coca Cola go up and down completely randomly.
Pair Corralation between PENN NATL and Coca Cola
Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.78 times more return on investment than Coca Cola. However, PENN NATL is 1.78 times more volatile than Coca Cola European Partners. It trades about 0.12 of its potential returns per unit of risk. Coca Cola European Partners is currently generating about 0.01 per unit of risk. If you would invest 1,773 in PENN NATL GAMING on October 29, 2024 and sell it today you would earn a total of 128.00 from holding PENN NATL GAMING or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
PENN NATL GAMING vs. Coca Cola European Partners
Performance |
| Timeline |
| PENN NATL GAMING |
| Coca Cola European |
PENN NATL and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and Coca Cola
The main advantage of trading using opposite PENN NATL and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| PENN NATL vs. MACOM Technology Solutions | PENN NATL vs. Alliance Data Systems | PENN NATL vs. SCOTT TECHNOLOGY | PENN NATL vs. Kingdee International Software |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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