Correlation Between Penn National and Federated Government

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

Diversification Opportunities for Penn National and Federated Government

0.01

Correlation Coefficient

Penn National  Federated Government

Significant diversification

The 3 months correlation between Penn and Federated is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Federated Government Ultrashor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Penn National i.e., Penn National and Federated Government go up and down completely randomly.

Pair Corralation between Penn National and Federated Government

Given the investment horizon of 90 days Penn National Gaming is expected to generate 30.5 times more return on investment than Federated Government. However, Penn National is 30.5 times more volatile than Federated Government Ultrashort. It trades about 0.19 of its potential returns per unit of risk. Federated Government Ultrashort is currently generating about 0.22 per unit of risk. If you would invest  1,813  in Penn National Gaming on October 23, 2024 and sell it today you would earn a total of  189.00  from holding Penn National Gaming or generate 10.42% return on investment over 90 days.

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

Penn National Gaming  vs.  Federated Government Ultrashor

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.

Federated Government

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Government Ultrashort are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Government 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 Government

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

The idea behind Penn National Gaming and Federated Government Ultrashort 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.