Correlation Between PENN NATL and AECOM TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both PENN NATL and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY 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 AECOM TECHNOLOGY, you can compare the effects of market volatilities on PENN NATL and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and AECOM TECHNOLOGY.
Diversification Opportunities for PENN NATL and AECOM TECHNOLOGY
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PENN and AECOM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of PENN NATL i.e., PENN NATL and AECOM TECHNOLOGY go up and down completely randomly.
Pair Corralation between PENN NATL and AECOM TECHNOLOGY
Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the AECOM TECHNOLOGY. In addition to that, PENN NATL is 1.44 times more volatile than AECOM TECHNOLOGY. It trades about -0.05 of its total potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about 0.05 per unit of volatility. If you would invest 10,400 in AECOM TECHNOLOGY on September 13, 2024 and sell it today you would earn a total of 200.00 from holding AECOM TECHNOLOGY or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN NATL GAMING vs. AECOM TECHNOLOGY
Performance |
| Timeline |
| PENN NATL GAMING |
| AECOM TECHNOLOGY |
PENN NATL and AECOM TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and AECOM TECHNOLOGY
The main advantage of trading using opposite PENN NATL and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, AECOM TECHNOLOGY 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 AECOM TECHNOLOGY will offset losses from the drop in AECOM TECHNOLOGY's long position.The idea behind PENN NATL GAMING and AECOM TECHNOLOGY 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.| AECOM TECHNOLOGY vs. Apple Inc | AECOM TECHNOLOGY vs. Apple Inc | AECOM TECHNOLOGY vs. Apple Inc | AECOM TECHNOLOGY vs. Apple Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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