Correlation Between Penn National and Monarch Casino

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

Diversification Opportunities for Penn National and Monarch Casino

0.65

Correlation Coefficient

Penn National  Monarch Casino

Poor diversification

The 3 months correlation between Penn and Monarch is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Monarch Casino Resort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Casino Resort 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 Monarch Casino. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Casino Resort has no effect on the direction of Penn National i.e., Penn National and Monarch Casino go up and down completely randomly.

Pair Corralation between Penn National and Monarch Casino

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Monarch Casino. In addition to that, Penn National is 1.86 times more volatile than Monarch Casino Resort. It trades about -0.04 of its total potential returns per unit of risk. Monarch Casino Resort is currently generating about 0.01 per unit of volatility. If you would invest  7,810  in Monarch Casino Resort on December 28, 2024 and sell it today you would earn a total of  29.00  from holding Monarch Casino Resort or generate 0.37% 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.  Monarch Casino Resort

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Monarch Casino Resort

Risk-Adjusted Performance

Insignificant

Over the last 90 days Monarch Casino Resort has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Monarch Casino is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Penn National and Monarch Casino

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

The idea behind Penn National Gaming and Monarch Casino Resort 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.