Correlation Between Penn National and Impala Platinum

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

Diversification Opportunities for Penn National and Impala Platinum

-0.39

Correlation Coefficient

Penn National  Impala Platinum

Very good diversification

The 3 months correlation between Penn and Impala is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Impala Platinum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impala Platinum Holdings 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 Impala Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impala Platinum Holdings has no effect on the direction of Penn National i.e., Penn National and Impala Platinum go up and down completely randomly.

Pair Corralation between Penn National and Impala Platinum

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Impala Platinum. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.02 times less risky than Impala Platinum. The stock trades about -0.03 of its potential returns per unit of risk. The Impala Platinum Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  482.00  in Impala Platinum Holdings on December 20, 2024 and sell it today you would earn a total of  144.00  from holding Impala Platinum Holdings or generate 29.88% return on investment over 90 days.

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

Penn National Gaming  vs.  Impala Platinum Holdings

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Impala Platinum Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Impala Platinum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Impala Platinum

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

The idea behind Penn National Gaming and Impala Platinum Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.