Correlation Between Performance Food and Penn National

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

By analyzing existing cross correlation between Performance Food Group and Penn National Gaming, you can compare the effects of market volatilities on Performance Food and Penn National 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 Performance Food with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Penn National.

Diversification Opportunities for Performance Food and Penn National

0.65

Correlation Coefficient

Performance Food  Penn National

Poor diversification

The 3 months correlation between Performance and Penn is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and Performance Food 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 Performance Food Group are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Performance Food i.e., Performance Food and Penn National go up and down completely randomly.

Pair Corralation between Performance Food and Penn National

Assuming the 90 days trading horizon Performance Food Group is expected to under-perform the Penn National. But the stock apears to be less risky and, when comparing its historical volatility, Performance Food Group is 2.0 times less risky than Penn National. The stock trades about -0.14 of its potential returns per unit of risk. The Penn National Gaming is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,781  in Penn National Gaming on December 23, 2024 and sell it today you would lose (207.00) from holding Penn National Gaming or give up 11.62% of portfolio value over 90 days.

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

Performance Food Group  vs.  Penn National Gaming

Performance Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Performance Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Performance Food and Penn National

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

The idea behind Performance Food Group and Penn National Gaming 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.