Correlation Between PENN Entertainment and Northland Power
Can any of the company-specific risk be diversified away by investing in both PENN Entertainment and Northland Power 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 Entertainment and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN Entertainment and Northland Power, you can compare the effects of market volatilities on PENN Entertainment and Northland Power 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 Entertainment with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN Entertainment and Northland Power.
Diversification Opportunities for PENN Entertainment and Northland Power
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PENN and Northland is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and PENN Entertainment 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 Entertainment are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and Northland Power go up and down completely randomly.
Pair Corralation between PENN Entertainment and Northland Power
Assuming the 90 days trading horizon PENN Entertainment is expected to generate 1.07 times more return on investment than Northland Power. However, PENN Entertainment is 1.07 times more volatile than Northland Power. It trades about 0.07 of its potential returns per unit of risk. Northland Power is currently generating about -0.12 per unit of risk. If you would invest 1,769 in PENN Entertainment on November 6, 2024 and sell it today you would earn a total of 173.00 from holding PENN Entertainment or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN Entertainment vs. Northland Power
Performance |
| Timeline |
| PENN Entertainment |
| Northland Power |
PENN Entertainment and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN Entertainment and Northland Power
The main advantage of trading using opposite PENN Entertainment and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN Entertainment position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| PENN Entertainment vs. ALTAIR RES INC | PENN Entertainment vs. Penn National Gaming | PENN Entertainment vs. CHINA SOUTHN AIR H | PENN Entertainment vs. RYANAIR HLDGS ADR |
| Northland Power vs. Perseus Mining Limited | Northland Power vs. Yanzhou Coal Mining | Northland Power vs. Haier Smart Home | Northland Power vs. HAVERTY FURNITURE A |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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