Correlation Between Penn National and Archer Daniels
Can any of the company-specific risk be diversified away by investing in both Penn National and Archer Daniels 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 Archer Daniels 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 Archer Daniels Midland, you can compare the effects of market volatilities on Penn National and Archer Daniels 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 Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Archer Daniels.
Diversification Opportunities for Penn National and Archer Daniels
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Penn and Archer is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Penn National i.e., Penn National and Archer Daniels go up and down completely randomly.
Pair Corralation between Penn National and Archer Daniels
Assuming the 90 days horizon Penn National Gaming is expected to generate 1.51 times more return on investment than Archer Daniels. However, Penn National is 1.51 times more volatile than Archer Daniels Midland. It trades about 0.14 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.12 per unit of risk. If you would invest 1,811 in Penn National Gaming on November 7, 2024 and sell it today you would earn a total of 132.00 from holding Penn National Gaming or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. Archer Daniels Midland
Performance |
| Timeline |
| Penn National Gaming |
| Archer Daniels Midland |
Penn National and Archer Daniels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and Archer Daniels
The main advantage of trading using opposite Penn National and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.| Penn National vs. Fukuyama Transporting Co | Penn National vs. Delta Air Lines | Penn National vs. Pentair plc | Penn National vs. BII Railway Transportation |
| Archer Daniels vs. Spirent Communications plc | Archer Daniels vs. Cairo Communication SpA | Archer Daniels vs. COMBA TELECOM SYST | Archer Daniels vs. Grupo Carso SAB |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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