Correlation Between Penn National and IShares Core

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

Diversification Opportunities for Penn National and IShares Core

0.45

Correlation Coefficient

Penn National  IShares Core

Very weak diversification

The 3 months correlation between Penn and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Penn National i.e., Penn National and IShares Core go up and down completely randomly.

Pair Corralation between Penn National and IShares Core

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the IShares Core. In addition to that, Penn National is 4.05 times more volatile than iShares Core SP. It trades about -0.02 of its total potential returns per unit of risk. iShares Core SP is currently generating about 0.11 per unit of volatility. If you would invest  41,324  in iShares Core SP on October 8, 2024 and sell it today you would earn a total of  21,531  from holding iShares Core SP or generate 52.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Penn National Gaming  vs.  iShares Core SP

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.

iShares Core SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Penn National and IShares Core

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

The idea behind Penn National Gaming and iShares Core SP 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.