Correlation Between Gear Energy and PENN NATL

Can any of the company-specific risk be diversified away by investing in both Gear Energy and PENN NATL 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 Gear Energy and PENN NATL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear Energy and PENN NATL GAMING, you can compare the effects of market volatilities on Gear Energy and PENN NATL 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 Gear Energy with a short position of PENN NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear Energy and PENN NATL.

Diversification Opportunities for Gear Energy and PENN NATL

-0.34

Correlation Coefficient

Gear Energy  PENN NATL

Very good diversification

The 3 months correlation between Gear and PENN is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING and Gear Energy 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 Gear Energy are associated (or correlated) with PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Gear Energy i.e., Gear Energy and PENN NATL go up and down completely randomly.

Pair Corralation between Gear Energy and PENN NATL

Assuming the 90 days horizon Gear Energy is expected to generate 1.33 times more return on investment than PENN NATL. However, Gear Energy is 1.33 times more volatile than PENN NATL GAMING. It trades about -0.2 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.32 per unit of risk. If you would invest  36.00  in Gear Energy on October 4, 2024 and sell it today you would lose (5.00) from holding Gear Energy or give up 13.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gear Energy  vs.  PENN NATL GAMING

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PENN NATL GAMING

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gear Energy and PENN NATL

The main advantage of trading using opposite Gear Energy and PENN NATL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear Energy position performs unexpectedly, PENN NATL 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 NATL will offset losses from the drop in PENN NATL's long position.

The idea behind Gear Energy and PENN NATL GAMING 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.