Correlation Between Penn National and Universal Display
Can any of the company-specific risk be diversified away by investing in both Penn National and Universal Display 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 Universal Display 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 Universal Display, you can compare the effects of market volatilities on Penn National and Universal Display 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 Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Universal Display.
Diversification Opportunities for Penn National and Universal Display
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Penn and Universal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of Penn National i.e., Penn National and Universal Display go up and down completely randomly.
Pair Corralation between Penn National and Universal Display
Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Universal Display. In addition to that, Penn National is 1.44 times more volatile than Universal Display. It trades about -0.04 of its total potential returns per unit of risk. Universal Display is currently generating about -0.05 per unit of volatility. If you would invest 16,258 in Universal Display on December 12, 2024 and sell it today you would lose (1,703) from holding Universal Display or give up 10.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. Universal Display
Performance |
| Timeline |
| Penn National Gaming |
| Universal Display |
Penn National and Universal Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and Universal Display
The main advantage of trading using opposite Penn National and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Universal Display 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 Universal Display will offset losses from the drop in Universal Display's long position.| Penn National vs. Caseys General Stores | ||
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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