Correlation Between Penn National and Aldel Financial

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

Diversification Opportunities for Penn National and Aldel Financial

-0.11

Correlation Coefficient

Penn National  Aldel Financial

Good diversification

The 3 months correlation between Penn and Aldel is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II 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 Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of Penn National i.e., Penn National and Aldel Financial go up and down completely randomly.

Pair Corralation between Penn National and Aldel Financial

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Aldel Financial. In addition to that, Penn National is 22.94 times more volatile than Aldel Financial II. It trades about -0.01 of its total potential returns per unit of risk. Aldel Financial II is currently generating about 0.11 per unit of volatility. If you would invest  990.00  in Aldel Financial II on October 7, 2024 and sell it today you would earn a total of  2.00  from holding Aldel Financial II or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.59%
Values	Daily Returns

Penn National Gaming  vs.  Aldel Financial II

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

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.

Aldel Financial II

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penn National and Aldel Financial

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

The idea behind Penn National Gaming and Aldel Financial II 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.