Correlation Between Penn National and Invesco Diversified

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

Diversification Opportunities for Penn National and Invesco Diversified

0.79

Correlation Coefficient

Penn National  Invesco Diversified

Poor diversification

The 3 months correlation between Penn and Invesco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Invesco Diversified Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Diversified 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 Invesco Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Diversified has no effect on the direction of Penn National i.e., Penn National and Invesco Diversified go up and down completely randomly.

Pair Corralation between Penn National and Invesco Diversified

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Invesco Diversified. In addition to that, Penn National is 3.95 times more volatile than Invesco Diversified Dividend. It trades about -0.02 of its total potential returns per unit of risk. Invesco Diversified Dividend is currently generating about 0.03 per unit of volatility. If you would invest  1,791  in Invesco Diversified Dividend on December 21, 2024 and sell it today you would earn a total of  22.00  from holding Invesco Diversified Dividend or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Penn National Gaming  vs.  Invesco Diversified Dividend

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.

Invesco Diversified

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Diversified Dividend are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Penn National and Invesco Diversified

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

The idea behind Penn National Gaming and Invesco Diversified Dividend 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.