Correlation Between PENN NATL and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both PENN NATL and Ambac Financial 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 Ambac Financial 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 Ambac Financial Group, you can compare the effects of market volatilities on PENN NATL and Ambac Financial 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 Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Ambac Financial.
Diversification Opportunities for PENN NATL and Ambac Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PENN and Ambac is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Ambac Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambac Financial Group 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 Ambac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambac Financial Group has no effect on the direction of PENN NATL i.e., PENN NATL and Ambac Financial go up and down completely randomly.
Pair Corralation between PENN NATL and Ambac Financial
Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Ambac Financial. In addition to that, PENN NATL is 1.42 times more volatile than Ambac Financial Group. It trades about -0.14 of its total potential returns per unit of risk. Ambac Financial Group is currently generating about 0.07 per unit of volatility. If you would invest 1,130 in Ambac Financial Group on September 23, 2024 and sell it today you would earn a total of 30.00 from holding Ambac Financial Group or generate 2.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN NATL GAMING vs. Ambac Financial Group
Performance |
| Timeline |
| PENN NATL GAMING |
| Ambac Financial Group |
PENN NATL and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and Ambac Financial
The main advantage of trading using opposite PENN NATL and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, Ambac Financial 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 Ambac Financial will offset losses from the drop in Ambac Financial's long position.The idea behind PENN NATL GAMING and Ambac Financial Group 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.| Ambac Financial vs. PLAYMATES TOYS | Ambac Financial vs. CHINA TONTINE WINES | Ambac Financial vs. SIMS METAL MGT | Ambac Financial vs. PENN NATL GAMING |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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