Correlation Between Penn National and Genus Paper

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

Diversification Opportunities for Penn National and Genus Paper

-0.15

Correlation Coefficient

Penn National  Genus Paper

Good diversification

The 3 months correlation between Penn and Genus is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Genus Paper Boards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genus Paper Boards 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 Genus Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genus Paper Boards has no effect on the direction of Penn National i.e., Penn National and Genus Paper go up and down completely randomly.

Pair Corralation between Penn National and Genus Paper

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.2 times more return on investment than Genus Paper. However, Penn National is 1.2 times more volatile than Genus Paper Boards. It trades about 0.05 of its potential returns per unit of risk. Genus Paper Boards is currently generating about -0.07 per unit of risk. If you would invest  1,862  in Penn National Gaming on October 23, 2024 and sell it today you would earn a total of  140.00  from holding Penn National Gaming or generate 7.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Penn National Gaming  vs.  Genus Paper Boards

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.

Genus Paper Boards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genus Paper Boards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Penn National and Genus Paper

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

The idea behind Penn National Gaming and Genus Paper Boards 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.