Correlation Between PENN Entertainment, and Raytheon Technologies

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

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

Diversification Opportunities for PENN Entertainment, and Raytheon Technologies

0.52

Correlation Coefficient

PENN Entertainment,  Raytheon Technologies

Very weak diversification

The 3 months correlation between PENN and Raytheon is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and Raytheon Technologies go up and down completely randomly.

Pair Corralation between PENN Entertainment, and Raytheon Technologies

Assuming the 90 days trading horizon PENN Entertainment, is expected to generate 7.4 times less return on investment than Raytheon Technologies. In addition to that, PENN Entertainment, is 1.91 times more volatile than Raytheon Technologies. It trades about 0.01 of its total potential returns per unit of risk. Raytheon Technologies is currently generating about 0.16 per unit of volatility. If you would invest  6,834  in Raytheon Technologies on October 9, 2024 and sell it today you would earn a total of  4,784  from holding Raytheon Technologies or generate 70.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.75%
Values	Daily Returns

PENN Entertainment,  vs.  Raytheon Technologies

PENN Entertainment,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment, are ranked lower than 10 (%) 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.

Raytheon Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PENN Entertainment, and Raytheon Technologies

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

The idea behind PENN Entertainment, and Raytheon Technologies 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.