Correlation Between Insurance Australia and PENN Entertainment

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

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

Diversification Opportunities for Insurance Australia and PENN Entertainment

0.52

Correlation Coefficient

Insurance Australia  PENN Entertainment

Very weak diversification

The 3 months correlation between Insurance and PENN is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and PENN Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN Entertainment and Insurance Australia 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 Insurance Australia Group 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 Insurance Australia i.e., Insurance Australia and PENN Entertainment go up and down completely randomly.

Pair Corralation between Insurance Australia and PENN Entertainment

Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.77 times more return on investment than PENN Entertainment. However, Insurance Australia Group is 1.3 times less risky than PENN Entertainment. It trades about -0.08 of its potential returns per unit of risk. PENN Entertainment is currently generating about -0.07 per unit of risk. If you would invest  492.00  in Insurance Australia Group on December 22, 2024 and sell it today you would lose (60.00) from holding Insurance Australia Group or give up 12.2% of portfolio value over 90 days.

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

Insurance Australia Group  vs.  PENN Entertainment

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PENN Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Insurance Australia and PENN Entertainment

The main advantage of trading using opposite Insurance Australia and PENN Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia 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 Insurance Australia Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.