Correlation Between Penn National and Dfa Investment

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

Diversification Opportunities for Penn National and Dfa Investment

-0.15

Correlation Coefficient

Penn National  Dfa Investment

Good diversification

The 3 months correlation between Penn and Dfa is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Dfa Investment Dimensions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Investment Dimensions 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 Dfa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Investment Dimensions has no effect on the direction of Penn National i.e., Penn National and Dfa Investment go up and down completely randomly.

Pair Corralation between Penn National and Dfa Investment

Given the investment horizon of 90 days Penn National Gaming is expected to generate 78.42 times more return on investment than Dfa Investment. However, Penn National is 78.42 times more volatile than Dfa Investment Dimensions. It trades about 0.05 of its potential returns per unit of risk. Dfa Investment Dimensions is currently generating about 0.34 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  Dfa Investment Dimensions

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.

Dfa Investment Dimensions

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa Investment Dimensions are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dfa Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Penn National and Dfa Investment

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

The idea behind Penn National Gaming and Dfa Investment Dimensions 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.