Correlation Between Lumia and PENN Entertainment

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

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

Diversification Opportunities for Lumia and PENN Entertainment

-0.04

Correlation Coefficient

Lumia  PENN Entertainment

Good diversification

The 3 months correlation between Lumia and PENN is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and PENN Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN Entertainment and Lumia 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 Lumia 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 Lumia i.e., Lumia and PENN Entertainment go up and down completely randomly.

Pair Corralation between Lumia and PENN Entertainment

Assuming the 90 days trading horizon Lumia is expected to generate 13.95 times more return on investment than PENN Entertainment. However, Lumia is 13.95 times more volatile than PENN Entertainment. It trades about 0.04 of its potential returns per unit of risk. PENN Entertainment is currently generating about -0.01 per unit of risk. If you would invest  0.00  in Lumia on October 24, 2024 and sell it today you would earn a total of  101.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.85%
Values	Daily Returns

Lumia  vs.  PENN Entertainment

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

PENN Entertainment

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Lumia and PENN Entertainment

The main advantage of trading using opposite Lumia and PENN Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.