Correlation Between Universal Entertainment and PENN Entertainment
Can any of the company-specific risk be diversified away by investing in both Universal Entertainment and PENN Entertainment 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 Universal Entertainment and PENN Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and PENN Entertainment, you can compare the effects of market volatilities on Universal Entertainment and PENN Entertainment 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 Universal Entertainment with a short position of PENN Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and PENN Entertainment.
Diversification Opportunities for Universal Entertainment and PENN Entertainment
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Universal and PENN is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and PENN Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN Entertainment and Universal 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 Universal Entertainment are associated (or correlated) with PENN Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN Entertainment has no effect on the direction of Universal Entertainment i.e., Universal Entertainment and PENN Entertainment go up and down completely randomly.
Pair Corralation between Universal Entertainment and PENN Entertainment
Assuming the 90 days trading horizon Universal Entertainment is expected to generate 0.82 times more return on investment than PENN Entertainment. However, Universal Entertainment is 1.21 times less risky than PENN Entertainment. It trades about 0.0 of its potential returns per unit of risk. PENN Entertainment is currently generating about -0.02 per unit of risk. If you would invest 645.00 in Universal Entertainment on October 25, 2024 and sell it today you would lose (10.00) from holding Universal Entertainment or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Entertainment vs. PENN Entertainment
Performance |
| Timeline |
| Universal Entertainment |
| PENN Entertainment |
Universal Entertainment and PENN Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Entertainment and PENN Entertainment
The main advantage of trading using opposite Universal Entertainment and PENN Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment position performs unexpectedly, PENN Entertainment 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 PENN Entertainment will offset losses from the drop in PENN Entertainment's long position.The idea behind Universal Entertainment and PENN Entertainment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| PENN Entertainment vs. Apple Inc | PENN Entertainment vs. Apple Inc | PENN Entertainment vs. Apple Inc | PENN Entertainment vs. Apple Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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