Correlation Between Penn National and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Penn National and Iridium Communications 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 National and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penn National Gaming and Iridium Communications, you can compare the effects of market volatilities on Penn National and Iridium Communications 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 National with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Iridium Communications.
Diversification Opportunities for Penn National and Iridium Communications
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Penn and Iridium is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Penn National 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 National Gaming are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Penn National i.e., Penn National and Iridium Communications go up and down completely randomly.
Pair Corralation between Penn National and Iridium Communications
Assuming the 90 days horizon Penn National Gaming is expected to generate 1.75 times more return on investment than Iridium Communications. However, Penn National is 1.75 times more volatile than Iridium Communications. It trades about 0.11 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.04 per unit of risk. If you would invest 1,775 in Penn National Gaming on October 29, 2024 and sell it today you would earn a total of 112.00 from holding Penn National Gaming or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. Iridium Communications
Performance |
| Timeline |
| Penn National Gaming |
| Iridium Communications |
Penn National and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and Iridium Communications
The main advantage of trading using opposite Penn National and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Penn National vs. Las Vegas Sands | Penn National vs. Galaxy Entertainment Group | Penn National vs. Sands China | Penn National vs. MGM Resorts International |
| Iridium Communications vs. LANDSEA GREEN MANAGEMENT | Iridium Communications vs. Q2M Managementberatung AG | Iridium Communications vs. ATRESMEDIA | Iridium Communications vs. Coor Service Management |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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