Correlation Between Penn National and GBS Software

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

Diversification Opportunities for Penn National and GBS Software

-0.06

Correlation Coefficient

Penn National  GBS Software

Good diversification

The 3 months correlation between Penn and GBS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and GBS Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBS Software AG 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 GBS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBS Software AG has no effect on the direction of Penn National i.e., Penn National and GBS Software go up and down completely randomly.

Pair Corralation between Penn National and GBS Software

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the GBS Software. In addition to that, Penn National is 1.44 times more volatile than GBS Software AG. It trades about -0.02 of its total potential returns per unit of risk. GBS Software AG is currently generating about 0.03 per unit of volatility. If you would invest  214.00  in GBS Software AG on October 8, 2024 and sell it today you would earn a total of  66.00  from holding GBS Software AG or generate 30.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.0%
Values	Daily Returns

Penn National Gaming  vs.  GBS Software AG

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.

GBS Software AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GBS Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penn National and GBS Software

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

The idea behind Penn National Gaming and GBS Software AG 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 Global Correlations module to find global opportunities by holding instruments from different markets.