Correlation Between Penn National and Axalta Coating

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

Diversification Opportunities for Penn National and Axalta Coating

0.7

Correlation Coefficient

Penn National  Axalta Coating

Poor diversification

The 3 months correlation between Penn and Axalta is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Axalta Coating Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axalta Coating Systems 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 Axalta Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axalta Coating Systems has no effect on the direction of Penn National i.e., Penn National and Axalta Coating go up and down completely randomly.

Pair Corralation between Penn National and Axalta Coating

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.74 times more return on investment than Axalta Coating. However, Penn National is 1.74 times more volatile than Axalta Coating Systems. It trades about 0.05 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.04 per unit of risk. If you would invest  1,862  in Penn National Gaming on October 23, 2024 and sell it today you would earn a total of  140.00  from holding Penn National Gaming or generate 7.52% return on investment over 90 days.

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

Penn National Gaming  vs.  Axalta Coating Systems

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Axalta Coating Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Axalta Coating is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Penn National and Axalta Coating

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

The idea behind Penn National Gaming and Axalta Coating Systems 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.