Correlation Between Penn National and Lord Abbett

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

Diversification Opportunities for Penn National and Lord Abbett

0.6

Correlation Coefficient

Penn National  Lord Abbett

Poor diversification

The 3 months correlation between Penn and Lord is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Lord Abbett Vertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Vertible 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Vertible has no effect on the direction of Penn National i.e., Penn National and Lord Abbett go up and down completely randomly.

Pair Corralation between Penn National and Lord Abbett

Given the investment horizon of 90 days Penn National is expected to generate 1.21 times less return on investment than Lord Abbett. In addition to that, Penn National is 4.07 times more volatile than Lord Abbett Vertible. It trades about 0.02 of its total potential returns per unit of risk. Lord Abbett Vertible is currently generating about 0.11 per unit of volatility. If you would invest  1,369  in Lord Abbett Vertible on October 8, 2024 and sell it today you would earn a total of  63.00  from holding Lord Abbett Vertible or generate 4.6% return on investment over 90 days.

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

Penn National Gaming  vs.  Lord Abbett Vertible

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.

Lord Abbett Vertible

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Vertible are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lord Abbett 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 Lord Abbett

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

The idea behind Penn National Gaming and Lord Abbett Vertible 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.