Correlation Between Penn National and GMO Internet
Can any of the company-specific risk be diversified away by investing in both Penn National and GMO Internet 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 GMO Internet 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 GMO Internet, you can compare the effects of market volatilities on Penn National and GMO Internet 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 GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and GMO Internet.
Diversification Opportunities for Penn National and GMO Internet
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Penn and GMO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Penn National i.e., Penn National and GMO Internet go up and down completely randomly.
Pair Corralation between Penn National and GMO Internet
Assuming the 90 days horizon Penn National Gaming is expected to generate 1.85 times more return on investment than GMO Internet. However, Penn National is 1.85 times more volatile than GMO Internet. It trades about 0.09 of its potential returns per unit of risk. GMO Internet is currently generating about 0.08 per unit of risk. If you would invest 1,708 in Penn National Gaming on November 6, 2024 and sell it today you would earn a total of 243.00 from holding Penn National Gaming or generate 14.23% 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. GMO Internet
Performance |
| Timeline |
| Penn National Gaming |
| GMO Internet |
Penn National and GMO Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and GMO Internet
The main advantage of trading using opposite Penn National and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, GMO Internet 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 GMO Internet will offset losses from the drop in GMO Internet's 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 |
| GMO Internet vs. Lamar Advertising | GMO Internet vs. PACIFIC ONLINE | GMO Internet vs. CarsalesCom | GMO Internet vs. SALESFORCE INC CDR |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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