Correlation Between PENN Entertainment, and Visa

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

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

Diversification Opportunities for PENN Entertainment, and Visa

0.88

Correlation Coefficient

PENN Entertainment,  Visa

Very poor diversification

The 3 months correlation between PENN and Visa is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and Visa go up and down completely randomly.

Pair Corralation between PENN Entertainment, and Visa

Assuming the 90 days trading horizon PENN Entertainment, is expected to under-perform the Visa. In addition to that, PENN Entertainment, is 1.93 times more volatile than Visa Inc. It trades about -0.01 of its total potential returns per unit of risk. Visa Inc is currently generating about 0.08 per unit of volatility. If you would invest  5,811  in Visa Inc on October 11, 2024 and sell it today you would earn a total of  3,748  from holding Visa Inc or generate 64.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.79%
Values	Daily Returns

PENN Entertainment,  vs.  Visa Inc

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.

Visa Inc

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with PENN Entertainment, and Visa

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

The idea behind PENN Entertainment, and Visa Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.