Correlation Between Penn National and CGN NEW

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

Diversification Opportunities for Penn National and CGN NEW

-0.12

Correlation Coefficient

Penn National  CGN NEW

Good diversification

The 3 months correlation between Penn and CGN is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and CGN NEW ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN NEW ENERGY 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 CGN NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN NEW ENERGY has no effect on the direction of Penn National i.e., Penn National and CGN NEW go up and down completely randomly.

Pair Corralation between Penn National and CGN NEW

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the CGN NEW. In addition to that, Penn National is 1.39 times more volatile than CGN NEW ENERGY. It trades about -0.04 of its total potential returns per unit of risk. CGN NEW ENERGY is currently generating about -0.04 per unit of volatility. If you would invest  29.00  in CGN NEW ENERGY on December 19, 2024 and sell it today you would lose (2.00) from holding CGN NEW ENERGY or give up 6.9% of portfolio value over 90 days.

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

Penn National Gaming  vs.  CGN NEW ENERGY

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

CGN NEW ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days CGN NEW ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CGN NEW is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penn National and CGN NEW

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

The idea behind Penn National Gaming and CGN NEW ENERGY 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.