Correlation Between Penn National and Ibstock PLC

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

Diversification Opportunities for Penn National and Ibstock PLC

0.14

Correlation Coefficient

Penn National  Ibstock PLC

Average diversification

The 3 months correlation between Penn and Ibstock is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Ibstock PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibstock PLC 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 Ibstock PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibstock PLC has no effect on the direction of Penn National i.e., Penn National and Ibstock PLC go up and down completely randomly.

Pair Corralation between Penn National and Ibstock PLC

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.36 times more return on investment than Ibstock PLC. However, Penn National is 1.36 times more volatile than Ibstock PLC. It trades about 0.19 of its potential returns per unit of risk. Ibstock PLC is currently generating about -0.11 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	94.74%
Values	Daily Returns

Penn National Gaming  vs.  Ibstock PLC

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.

Ibstock PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ibstock PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Penn National and Ibstock PLC

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

The idea behind Penn National Gaming and Ibstock PLC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.