Correlation Between Transport International and PENN NATL

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

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

Diversification Opportunities for Transport International and PENN NATL

-0.5

Correlation Coefficient

Transport International  PENN NATL

Very good diversification

The 3 months correlation between Transport and PENN is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin 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 Transport International 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 Transport International Holdings 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 Transport International i.e., Transport International and PENN NATL go up and down completely randomly.

Pair Corralation between Transport International and PENN NATL

Assuming the 90 days horizon Transport International Holdings is expected to under-perform the PENN NATL. But the stock apears to be less risky and, when comparing its historical volatility, Transport International Holdings is 1.45 times less risky than PENN NATL. The stock trades about -0.04 of its potential returns per unit of risk. The PENN NATL GAMING is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,699  in PENN NATL GAMING on October 10, 2024 and sell it today you would earn a total of  177.00  from holding PENN NATL GAMING or generate 10.42% return on investment over 90 days.

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

Transport International Holdin  vs.  PENN NATL GAMING

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PENN NATL GAMING

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Transport International and PENN NATL

The main advantage of trading using opposite Transport International and PENN NATL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.