Correlation Between Penn National and AYR WELLNESS

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

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

Diversification Opportunities for Penn National and AYR WELLNESS

0.6

Correlation Coefficient

Penn National  AYR WELLNESS

Poor diversification

The 3 months correlation between Penn and AYR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and AYR WELLNESS INCRESVTG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AYR WELLNESS INCRESVTG and Penn National 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 National Gaming are associated (or correlated) with AYR WELLNESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AYR WELLNESS INCRESVTG has no effect on the direction of Penn National i.e., Penn National and AYR WELLNESS go up and down completely randomly.

Pair Corralation between Penn National and AYR WELLNESS

Given the investment horizon of 90 days Penn National Gaming is expected to generate 0.38 times more return on investment than AYR WELLNESS. However, Penn National Gaming is 2.64 times less risky than AYR WELLNESS. It trades about -0.04 of its potential returns per unit of risk. AYR WELLNESS INCRESVTG is currently generating about -0.19 per unit of risk. If you would invest  1,817  in Penn National Gaming on December 19, 2024 and sell it today you would lose (164.00) from holding Penn National Gaming or give up 9.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Penn National Gaming  vs.  AYR WELLNESS INCRESVTG

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. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

AYR WELLNESS INCRESVTG

Risk-Adjusted Performance

Very Weak

Over the last 90 days AYR WELLNESS INCRESVTG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Penn National and AYR WELLNESS

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

The idea behind Penn National Gaming and AYR WELLNESS INCRESVTG 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.