Correlation Between REVO INSURANCE and PENN Entertainment

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

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

Diversification Opportunities for REVO INSURANCE and PENN Entertainment

0.26

Correlation Coefficient

REVO INSURANCE  PENN Entertainment

Modest diversification

The 3 months correlation between REVO and PENN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding REVO INSURANCE SPA and PENN Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN Entertainment and REVO INSURANCE 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 REVO INSURANCE SPA 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 REVO INSURANCE i.e., REVO INSURANCE and PENN Entertainment go up and down completely randomly.

Pair Corralation between REVO INSURANCE and PENN Entertainment

Assuming the 90 days horizon REVO INSURANCE is expected to generate 1.08 times less return on investment than PENN Entertainment. But when comparing it to its historical volatility, REVO INSURANCE SPA is 1.32 times less risky than PENN Entertainment. It trades about 0.09 of its potential returns per unit of risk. PENN Entertainment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,730  in PENN Entertainment on October 22, 2024 and sell it today you would earn a total of  192.00  from holding PENN Entertainment or generate 11.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

REVO INSURANCE SPA  vs.  PENN Entertainment

REVO INSURANCE SPA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

PENN Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, PENN Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REVO INSURANCE and PENN Entertainment

The main advantage of trading using opposite REVO INSURANCE and PENN Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REVO INSURANCE 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 REVO INSURANCE SPA 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.