Correlation Between Penn National and GREEN PLAINS

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

Diversification Opportunities for Penn National and GREEN PLAINS

0.17

Correlation Coefficient

Penn National  GREEN PLAINS

Average diversification

The 3 months correlation between Penn and GREEN is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and GREEN PLAINS RENEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREEN PLAINS RENEW 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 GREEN PLAINS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREEN PLAINS RENEW has no effect on the direction of Penn National i.e., Penn National and GREEN PLAINS go up and down completely randomly.

Pair Corralation between Penn National and GREEN PLAINS

Given the investment horizon of 90 days Penn National Gaming is expected to generate 0.63 times more return on investment than GREEN PLAINS. However, Penn National Gaming is 1.59 times less risky than GREEN PLAINS. It trades about -0.02 of its potential returns per unit of risk. GREEN PLAINS RENEW is currently generating about -0.18 per unit of risk. If you would invest  1,862  in Penn National Gaming on December 20, 2024 and sell it today you would lose (122.00) from holding Penn National Gaming or give up 6.55% of portfolio value over 90 days.

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

Penn National Gaming  vs.  GREEN PLAINS RENEW

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.

GREEN PLAINS RENEW

Risk-Adjusted Performance

Very Weak

Over the last 90 days GREEN PLAINS RENEW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Penn National and GREEN PLAINS

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

The idea behind Penn National Gaming and GREEN PLAINS RENEW 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.