Correlation Between PENN Entertainment, and OReilly Automotive

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

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

Diversification Opportunities for PENN Entertainment, and OReilly Automotive

0.72

Correlation Coefficient

PENN Entertainment,  OReilly Automotive

Poor diversification

The 3 months correlation between PENN and OReilly is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive 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 OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and OReilly Automotive go up and down completely randomly.

Pair Corralation between PENN Entertainment, and OReilly Automotive

Assuming the 90 days trading horizon PENN Entertainment, is expected to generate 0.97 times more return on investment than OReilly Automotive. However, PENN Entertainment, is 1.03 times less risky than OReilly Automotive. It trades about 0.12 of its potential returns per unit of risk. OReilly Automotive is currently generating about 0.05 per unit of risk. If you would invest  1,057  in PENN Entertainment, on October 24, 2024 and sell it today you would earn a total of  114.00  from holding PENN Entertainment, or generate 10.79% return on investment over 90 days.

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

PENN Entertainment,  vs.  OReilly Automotive

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.

OReilly Automotive

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, OReilly Automotive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PENN Entertainment, and OReilly Automotive

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

The idea behind PENN Entertainment, and OReilly Automotive 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.