Correlation Between Penn National and CELLULAR GOODS

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

Diversification Opportunities for Penn National and CELLULAR GOODS

0.36

Correlation Coefficient

Penn National  CELLULAR GOODS

Weak diversification

The 3 months correlation between Penn and CELLULAR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and CELLULAR GOODS LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CELLULAR GOODS LS 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 CELLULAR GOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CELLULAR GOODS LS has no effect on the direction of Penn National i.e., Penn National and CELLULAR GOODS go up and down completely randomly.

Pair Corralation between Penn National and CELLULAR GOODS

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the CELLULAR GOODS. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 14.5 times less risky than CELLULAR GOODS. The stock trades about -0.01 of its potential returns per unit of risk. The CELLULAR GOODS LS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.05  in CELLULAR GOODS LS on December 21, 2024 and sell it today you would earn a total of  0.15  from holding CELLULAR GOODS LS or generate 300.0% return on investment over 90 days.

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

Penn National Gaming  vs.  CELLULAR GOODS LS

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 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.

CELLULAR GOODS LS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CELLULAR GOODS LS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CELLULAR GOODS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and CELLULAR GOODS

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

The idea behind Penn National Gaming and CELLULAR GOODS LS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.