Correlation Between Penn National and Intl Star

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

Diversification Opportunities for Penn National and Intl Star

-0.57

Correlation Coefficient

Penn National  Intl Star

Excellent diversification

The 3 months correlation between Penn and Intl is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Intl Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intl Star 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 Intl Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intl Star has no effect on the direction of Penn National i.e., Penn National and Intl Star go up and down completely randomly.

Pair Corralation between Penn National and Intl Star

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Intl Star. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 4.77 times less risky than Intl Star. The stock trades about -0.02 of its potential returns per unit of risk. The Intl Star is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.13  in Intl Star on October 8, 2024 and sell it today you would lose (0.05) from holding Intl Star or give up 38.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  Intl Star

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Intl Star

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intl Star has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Penn National and Intl Star

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

The idea behind Penn National Gaming and Intl Star 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.