Correlation Between PENN Entertainment, and Mastercard Incorporated

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

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

Diversification Opportunities for PENN Entertainment, and Mastercard Incorporated

0.86

Correlation Coefficient

PENN Entertainment,  Mastercard Incorporated

Very poor diversification

The 3 months correlation between PENN and Mastercard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and PENN Entertainment, 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 PENN Entertainment, are associated (or correlated) with Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between PENN Entertainment, and Mastercard Incorporated

Assuming the 90 days trading horizon PENN Entertainment, is expected to generate 1.31 times less return on investment than Mastercard Incorporated. In addition to that, PENN Entertainment, is 1.03 times more volatile than Mastercard Incorporated. It trades about 0.16 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.21 per unit of volatility. If you would invest  8,726  in Mastercard Incorporated on October 6, 2024 and sell it today you would earn a total of  1,750  from holding Mastercard Incorporated or generate 20.06% return on investment over 90 days.

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

PENN Entertainment,  vs.  Mastercard Incorporated

PENN Entertainment,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, PENN Entertainment, sustained solid returns over the last few months and may actually be approaching a breakup point.

Mastercard Incorporated

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Mastercard Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN Entertainment, and Mastercard Incorporated

The main advantage of trading using opposite PENN Entertainment, and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN Entertainment, position performs unexpectedly, Mastercard Incorporated 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 Mastercard Incorporated will offset losses from the drop in Mastercard Incorporated's long position.

The idea behind PENN Entertainment, and Mastercard Incorporated 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.