Correlation Between Penn National and Constellation Software
Can any of the company-specific risk be diversified away by investing in both Penn National and Constellation Software 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 Constellation Software 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 Constellation Software, you can compare the effects of market volatilities on Penn National and Constellation Software 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 Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Constellation Software.
Diversification Opportunities for Penn National and Constellation Software
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Penn and Constellation is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Penn National i.e., Penn National and Constellation Software go up and down completely randomly.
Pair Corralation between Penn National and Constellation Software
Assuming the 90 days horizon Penn National Gaming is expected to generate 1.56 times more return on investment than Constellation Software. However, Penn National is 1.56 times more volatile than Constellation Software. It trades about 0.12 of its potential returns per unit of risk. Constellation Software is currently generating about 0.17 per unit of risk. If you would invest 1,864 in Penn National Gaming on November 4, 2024 and sell it today you would earn a total of 121.00 from holding Penn National Gaming or generate 6.49% 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. Constellation Software
Performance |
| Timeline |
| Penn National Gaming |
| Constellation Software |
Penn National and Constellation Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and Constellation Software
The main advantage of trading using opposite Penn National and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Constellation Software 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 Constellation Software will offset losses from the drop in Constellation Software's long position.| Penn National vs. KIMBALL ELECTRONICS | Penn National vs. Singapore Telecommunications Limited | Penn National vs. Telecom Argentina SA | Penn National vs. Spirent Communications plc |
| Constellation Software vs. Nishi Nippon Railroad Co | Constellation Software vs. TITANIUM TRANSPORTGROUP | Constellation Software vs. Broadcom | Constellation Software vs. Transport International Holdings |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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