Correlation Between PENN Entertainment, and NatWest Group

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

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

Diversification Opportunities for PENN Entertainment, and NatWest Group

0.81

Correlation Coefficient

PENN Entertainment,  NatWest Group

Very poor diversification

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

Pair Corralation between PENN Entertainment, and NatWest Group

Assuming the 90 days trading horizon PENN Entertainment, is expected to under-perform the NatWest Group. But the stock apears to be less risky and, when comparing its historical volatility, PENN Entertainment, is 13.4 times less risky than NatWest Group. The stock trades about -0.24 of its potential returns per unit of risk. The NatWest Group plc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,252  in NatWest Group plc on October 24, 2024 and sell it today you would lose (32.00) from holding NatWest Group plc or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

PENN Entertainment,  vs.  NatWest Group plc

PENN Entertainment,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, PENN Entertainment, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NatWest Group plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NatWest Group plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NatWest Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN Entertainment, and NatWest Group

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

The idea behind PENN Entertainment, and NatWest Group plc 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.