Correlation Between Penn National and Enbridge Srs

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

Diversification Opportunities for Penn National and Enbridge Srs

-0.46

Correlation Coefficient

Penn National  Enbridge Srs

Very good diversification

The 3 months correlation between Penn and Enbridge is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Enbridge Srs N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Srs N 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 Enbridge Srs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Srs N has no effect on the direction of Penn National i.e., Penn National and Enbridge Srs go up and down completely randomly.

Pair Corralation between Penn National and Enbridge Srs

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Enbridge Srs. In addition to that, Penn National is 4.65 times more volatile than Enbridge Srs N. It trades about -0.02 of its total potential returns per unit of risk. Enbridge Srs N is currently generating about 0.11 per unit of volatility. If you would invest  1,617  in Enbridge Srs N on October 8, 2024 and sell it today you would earn a total of  754.00  from holding Enbridge Srs N or generate 46.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Penn National Gaming  vs.  Enbridge Srs N

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Insignificant

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.

Enbridge Srs N

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Srs N are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Enbridge Srs may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penn National and Enbridge Srs

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

The idea behind Penn National Gaming and Enbridge Srs N 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.