Correlation Between PENN NATL and UNITED UTILITIES
Can any of the company-specific risk be diversified away by investing in both PENN NATL and UNITED UTILITIES 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 UNITED UTILITIES 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 UNITED UTILITIES GR, you can compare the effects of market volatilities on PENN NATL and UNITED UTILITIES 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 UNITED UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and UNITED UTILITIES.
Diversification Opportunities for PENN NATL and UNITED UTILITIES
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PENN and UNITED is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES 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 UNITED UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED UTILITIES has no effect on the direction of PENN NATL i.e., PENN NATL and UNITED UTILITIES go up and down completely randomly.
Pair Corralation between PENN NATL and UNITED UTILITIES
Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the UNITED UTILITIES. In addition to that, PENN NATL is 1.85 times more volatile than UNITED UTILITIES GR. It trades about -0.16 of its total potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.16 per unit of volatility. If you would invest 1,234 in UNITED UTILITIES GR on September 14, 2024 and sell it today you would earn a total of 56.00 from holding UNITED UTILITIES GR or generate 4.54% 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. UNITED UTILITIES GR
Performance |
| Timeline |
| PENN NATL GAMING |
| UNITED UTILITIES |
PENN NATL and UNITED UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and UNITED UTILITIES
The main advantage of trading using opposite PENN NATL and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, UNITED UTILITIES 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 UNITED UTILITIES will offset losses from the drop in UNITED UTILITIES's long position.The idea behind PENN NATL GAMING and UNITED UTILITIES GR 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.| UNITED UTILITIES vs. National Retail Properties | UNITED UTILITIES vs. QURATE RETAIL INC | UNITED UTILITIES vs. Sumitomo Rubber Industries | UNITED UTILITIES vs. GOODYEAR T RUBBER |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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