Correlation Between Penn National and Citizens Financial

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

Diversification Opportunities for Penn National and Citizens Financial

0.42

Correlation Coefficient

Penn National  Citizens Financial

Very weak diversification

The 3 months correlation between Penn and Citizens is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Group, has no effect on the direction of Penn National i.e., Penn National and Citizens Financial go up and down completely randomly.

Pair Corralation between Penn National and Citizens Financial

Given the investment horizon of 90 days Penn National is expected to generate 2.37 times less return on investment than Citizens Financial. In addition to that, Penn National is 1.21 times more volatile than Citizens Financial Group,. It trades about 0.05 of its total potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.16 per unit of volatility. If you would invest  23,455  in Citizens Financial Group, on October 23, 2024 and sell it today you would earn a total of  5,525  from holding Citizens Financial Group, or generate 23.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Penn National Gaming  vs.  Citizens Financial Group,

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.

Citizens Financial Group,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Citizens Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Citizens Financial

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

The idea behind Penn National Gaming and Citizens Financial Group, 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.