Correlation Between Penn National and Federated Floating

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

Diversification Opportunities for Penn National and Federated Floating

0.22

Correlation Coefficient

Penn National  Federated Floating

Modest diversification

The 3 months correlation between Penn and Federated is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Federated Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Floating Rate 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 Federated Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Floating Rate has no effect on the direction of Penn National i.e., Penn National and Federated Floating go up and down completely randomly.

Pair Corralation between Penn National and Federated Floating

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Federated Floating. In addition to that, Penn National is 19.93 times more volatile than Federated Floating Rate. It trades about -0.01 of its total potential returns per unit of risk. Federated Floating Rate is currently generating about 0.12 per unit of volatility. If you would invest  848.00  in Federated Floating Rate on December 21, 2024 and sell it today you would earn a total of  9.00  from holding Federated Floating Rate or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Penn National Gaming  vs.  Federated Floating Rate

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.

Federated Floating Rate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Floating Rate are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Floating 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 Federated Floating

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

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