Correlation Between CPU SOFTWAREHOUSE and Penn National

Can any of the company-specific risk be diversified away by investing in both CPU SOFTWAREHOUSE and Penn National 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 CPU SOFTWAREHOUSE and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CPU SOFTWAREHOUSE and Penn National Gaming, you can compare the effects of market volatilities on CPU SOFTWAREHOUSE and Penn National 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 CPU SOFTWAREHOUSE with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPU SOFTWAREHOUSE and Penn National.

Diversification Opportunities for CPU SOFTWAREHOUSE and Penn National

0.08

Correlation Coefficient

CPU SOFTWAREHOUSE  Penn National

Significant diversification

The 3 months correlation between CPU and Penn is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and Penn National go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and Penn National

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to generate 2.74 times more return on investment than Penn National. However, CPU SOFTWAREHOUSE is 2.74 times more volatile than Penn National Gaming. It trades about 0.08 of its potential returns per unit of risk. Penn National Gaming is currently generating about -0.04 per unit of risk. If you would invest  89.00  in CPU SOFTWAREHOUSE on December 20, 2024 and sell it today you would earn a total of  20.00  from holding CPU SOFTWAREHOUSE or generate 22.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

CPU SOFTWAREHOUSE  vs.  Penn National Gaming

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CPU SOFTWAREHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CPU SOFTWAREHOUSE and Penn National

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

The idea behind CPU SOFTWAREHOUSE and Penn National 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.