Correlation Between Penn National and Eagle Point

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

Diversification Opportunities for Penn National and Eagle Point

0.44

Correlation Coefficient

Penn National  Eagle Point

Very weak diversification

The 3 months correlation between Penn and Eagle is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit 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 Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Credit has no effect on the direction of Penn National i.e., Penn National and Eagle Point go up and down completely randomly.

Pair Corralation between Penn National and Eagle Point

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Eagle Point. In addition to that, Penn National is 7.0 times more volatile than Eagle Point Credit. It trades about -0.14 of its total potential returns per unit of risk. Eagle Point Credit is currently generating about -0.19 per unit of volatility. If you would invest  2,015  in Eagle Point Credit on October 7, 2024 and sell it today you would lose (35.00) from holding Eagle Point Credit or give up 1.74% of portfolio value over 90 days.

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

Penn National Gaming  vs.  Eagle Point Credit

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.

Eagle Point Credit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Eagle Point is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Penn National and Eagle Point

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

The idea behind Penn National Gaming and Eagle Point Credit 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.