Correlation Between Smart Share and Penn National

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

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

Diversification Opportunities for Smart Share and Penn National

-0.22

Correlation Coefficient

Smart Share  Penn National

Very good diversification

The 3 months correlation between Smart and Penn is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global 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 Smart Share 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 Smart Share Global 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 Smart Share i.e., Smart Share and Penn National go up and down completely randomly.

Pair Corralation between Smart Share and Penn National

Allowing for the 90-day total investment horizon Smart Share Global is expected to generate 1.57 times more return on investment than Penn National. However, Smart Share is 1.57 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  58.00  in Smart Share Global on October 9, 2024 and sell it today you would earn a total of  40.00  from holding Smart Share Global or generate 68.97% return on investment over 90 days.

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

Smart Share Global  vs.  Penn National Gaming

Smart Share Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Penn National Gaming

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Smart Share and Penn National

The main advantage of trading using opposite Smart Share and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Share 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 Smart Share Global 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..