Correlation Between PENN Entertainment, and Microsoft

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

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

Diversification Opportunities for PENN Entertainment, and Microsoft

-0.81

Correlation Coefficient

PENN Entertainment,  Microsoft

Pay attention - limited upside

The 3 months correlation between PENN and Microsoft is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and Microsoft go up and down completely randomly.

Pair Corralation between PENN Entertainment, and Microsoft

Assuming the 90 days trading horizon PENN Entertainment, is expected to generate 0.31 times more return on investment than Microsoft. However, PENN Entertainment, is 3.24 times less risky than Microsoft. It trades about 0.15 of its potential returns per unit of risk. Microsoft is currently generating about -0.21 per unit of risk. If you would invest  1,179  in PENN Entertainment, on December 25, 2024 and sell it today you would earn a total of  46.00  from holding PENN Entertainment, or generate 3.9% return on investment over 90 days.

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

PENN Entertainment,  vs.  Microsoft

PENN Entertainment,

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment, are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, PENN Entertainment, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PENN Entertainment, and Microsoft

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

The idea behind PENN Entertainment, and Microsoft 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.