Correlation Between Penn National and Spectral Med

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

Diversification Opportunities for Penn National and Spectral Med

-0.12

Correlation Coefficient

Penn National  Spectral Med

Good diversification

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

Pair Corralation between Penn National and Spectral Med

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Spectral Med. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.31 times less risky than Spectral Med. The stock trades about -0.01 of its potential returns per unit of risk. The Spectral Med is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Spectral Med on December 21, 2024 and sell it today you would earn a total of  18.00  from holding Spectral Med or generate 36.73% 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.  Spectral Med

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 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.

Spectral Med

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spectral Med are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Spectral Med displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Spectral Med

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

The idea behind Penn National Gaming and Spectral Med 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.