Correlation Between Penn National and Hartford Municipal

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

Diversification Opportunities for Penn National and Hartford Municipal

0.04

Correlation Coefficient

Penn National  Hartford Municipal

Significant diversification

The 3 months correlation between Penn and Hartford is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Hartford Municipal Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Municipal Short 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 Hartford Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Municipal Short has no effect on the direction of Penn National i.e., Penn National and Hartford Municipal go up and down completely randomly.

Pair Corralation between Penn National and Hartford Municipal

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Hartford Municipal. In addition to that, Penn National is 41.75 times more volatile than Hartford Municipal Short. It trades about -0.01 of its total potential returns per unit of risk. Hartford Municipal Short is currently generating about 0.28 per unit of volatility. If you would invest  980.00  in Hartford Municipal Short on December 21, 2024 and sell it today you would earn a total of  12.00  from holding Hartford Municipal Short or generate 1.22% 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.  Hartford Municipal Short

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.

Hartford Municipal Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Municipal Short are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Hartford Municipal 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 Hartford Municipal

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

The idea behind Penn National Gaming and Hartford Municipal Short 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.