Correlation Between Penn National and Molson Coors

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

Diversification Opportunities for Penn National and Molson Coors

-0.3

Correlation Coefficient

Penn National  Molson Coors

Very good diversification

The 3 months correlation between Penn and Molson is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Penn National i.e., Penn National and Molson Coors go up and down completely randomly.

Pair Corralation between Penn National and Molson Coors

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Molson Coors. In addition to that, Penn National is 2.61 times more volatile than Molson Coors Beverage. It trades about -0.01 of its total potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.19 per unit of volatility. If you would invest  29,735  in Molson Coors Beverage on December 23, 2024 and sell it today you would earn a total of  4,045  from holding Molson Coors Beverage or generate 13.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Penn National Gaming  vs.  Molson Coors Beverage

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.

Molson Coors Beverage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Molson Coors sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Molson Coors

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

The idea behind Penn National Gaming and Molson Coors Beverage 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.