Correlation Between Penn National and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Penn National and DFS Furniture 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 DFS Furniture 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 DFS Furniture PLC, you can compare the effects of market volatilities on Penn National and DFS Furniture 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 DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and DFS Furniture.
Diversification Opportunities for Penn National and DFS Furniture
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Penn and DFS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of Penn National i.e., Penn National and DFS Furniture go up and down completely randomly.
Pair Corralation between Penn National and DFS Furniture
Assuming the 90 days horizon Penn National Gaming is expected to generate 1.45 times more return on investment than DFS Furniture. However, Penn National is 1.45 times more volatile than DFS Furniture PLC. It trades about 0.11 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.11 per unit of risk. If you would invest 1,876 in Penn National Gaming on September 1, 2024 and sell it today you would earn a total of 112.00 from holding Penn National Gaming or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. DFS Furniture PLC
Performance |
| Timeline |
| Penn National Gaming |
| DFS Furniture PLC |
Penn National and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and DFS Furniture
The main advantage of trading using opposite Penn National and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, DFS Furniture 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 DFS Furniture will offset losses from the drop in DFS Furniture's long position.| Penn National vs. WESTLAKE CHEMICAL | Penn National vs. Marie Brizard Wine | Penn National vs. NorAm Drilling AS | Penn National vs. SEKISUI CHEMICAL |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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