Correlation Between Penn National and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both Penn National and Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture, you can compare the effects of market volatilities on Penn National and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Hooker Furniture.
Diversification Opportunities for Penn National and Hooker Furniture
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Penn and Hooker is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Penn National i.e., Penn National and Hooker Furniture go up and down completely randomly.
Pair Corralation between Penn National and Hooker Furniture
Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.36 times more return on investment than Hooker Furniture. However, Penn National is 1.36 times more volatile than Hooker Furniture. It trades about -0.02 of its potential returns per unit of risk. Hooker Furniture is currently generating about -0.2 per unit of risk. If you would invest 1,845 in Penn National Gaming on December 18, 2024 and sell it today you would lose (119.00) from holding Penn National Gaming or give up 6.45% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Penn National Gaming vs. Hooker Furniture
Performance |
Timeline |
Penn National Gaming |
Hooker Furniture |
Penn National and Hooker Furniture Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Penn National and Hooker Furniture
The main advantage of trading using opposite Penn National and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.Penn National vs. DraftKings | Penn National vs. MGM Resorts International | Penn National vs. Caesars Entertainment | Penn National vs. Boyd Gaming |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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