Correlation Between Penn National and Leverage Shares

Can any of the company-specific risk be diversified away by investing in both Penn National and Leverage Shares 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 Leverage Shares 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 Leverage Shares 5x, you can compare the effects of market volatilities on Penn National and Leverage Shares 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 Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Leverage Shares.

Diversification Opportunities for Penn National and Leverage Shares

0.24

Correlation Coefficient

Penn National  Leverage Shares

Modest diversification

The 3 months correlation between Penn and Leverage is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Leverage Shares 5x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 5x 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 Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 5x has no effect on the direction of Penn National i.e., Penn National and Leverage Shares go up and down completely randomly.

Pair Corralation between Penn National and Leverage Shares

Given the investment horizon of 90 days Penn National Gaming is expected to generate 0.69 times more return on investment than Leverage Shares. However, Penn National Gaming is 1.44 times less risky than Leverage Shares. It trades about 0.0 of its potential returns per unit of risk. Leverage Shares 5x is currently generating about -0.07 per unit of risk. If you would invest  1,986  in Penn National Gaming on October 8, 2024 and sell it today you would lose (19.00) from holding Penn National Gaming or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Penn National Gaming  vs.  Leverage Shares 5x

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Penn National is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Leverage Shares 5x

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 5x are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Leverage Shares

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

The idea behind Penn National Gaming and Leverage Shares 5x 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.