Correlation Between Penn National and Indus

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

Diversification Opportunities for Penn National and Indus

-0.26

Correlation Coefficient

Penn National  Indus

Very good diversification

The 3 months correlation between Penn and Indus is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Indus Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Motor 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 Indus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Motor has no effect on the direction of Penn National i.e., Penn National and Indus go up and down completely randomly.

Pair Corralation between Penn National and Indus

Given the investment horizon of 90 days Penn National is expected to generate 1.35 times less return on investment than Indus. In addition to that, Penn National is 1.67 times more volatile than Indus Motor. It trades about 0.05 of its total potential returns per unit of risk. Indus Motor is currently generating about 0.12 per unit of volatility. If you would invest  179,996  in Indus Motor on October 23, 2024 and sell it today you would earn a total of  24,855  from holding Indus Motor or generate 13.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Penn National Gaming  vs.  Indus Motor

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.

Indus Motor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indus Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Indus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Indus

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

The idea behind Penn National Gaming and Indus Motor 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.