Correlation Between National CineMedia and Penn National

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

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

Diversification Opportunities for National CineMedia and Penn National

0.16

Correlation Coefficient

National CineMedia  Penn National

Average diversification

The 3 months correlation between National and Penn is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia 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 National CineMedia 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 National CineMedia 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 National CineMedia i.e., National CineMedia and Penn National go up and down completely randomly.

Pair Corralation between National CineMedia and Penn National

Given the investment horizon of 90 days National CineMedia is expected to generate 6.9 times less return on investment than Penn National. But when comparing it to its historical volatility, National CineMedia is 1.09 times less risky than Penn National. It trades about 0.02 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,870  in Penn National Gaming on October 26, 2024 and sell it today you would earn a total of  119.00  from holding Penn National Gaming or generate 6.36% return on investment over 90 days.

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

National CineMedia  vs.  Penn National Gaming

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Penn National is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National CineMedia and Penn National

The main advantage of trading using opposite National CineMedia and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National CineMedia 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 National CineMedia 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.