Correlation Between Penn National and DTCOM Direct

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

Diversification Opportunities for Penn National and DTCOM Direct

-0.19

Correlation Coefficient

Penn National  DTCOM Direct

Good diversification

The 3 months correlation between Penn and DTCOM is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and DTCOM Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTCOM Direct 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 DTCOM Direct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTCOM Direct has no effect on the direction of Penn National i.e., Penn National and DTCOM Direct go up and down completely randomly.

Pair Corralation between Penn National and DTCOM Direct

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the DTCOM Direct. In addition to that, Penn National is 1.21 times more volatile than DTCOM Direct. It trades about -0.02 of its total potential returns per unit of risk. DTCOM Direct is currently generating about 0.0 per unit of volatility. If you would invest  498.00  in DTCOM Direct on October 23, 2024 and sell it today you would lose (55.00) from holding DTCOM Direct or give up 11.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Penn National Gaming  vs.  DTCOM Direct

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.

DTCOM Direct

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DTCOM Direct are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DTCOM Direct unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and DTCOM Direct

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

The idea behind Penn National Gaming and DTCOM Direct 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.