Correlation Between Penn National and Neiman Large

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

Diversification Opportunities for Penn National and Neiman Large

0.68

Correlation Coefficient

Penn National  Neiman Large

Poor diversification

The 3 months correlation between Penn and Neiman is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Neiman Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neiman Large Cap 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 Neiman Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neiman Large Cap has no effect on the direction of Penn National i.e., Penn National and Neiman Large go up and down completely randomly.

Pair Corralation between Penn National and Neiman Large

Given the investment horizon of 90 days Penn National Gaming is expected to generate 4.21 times more return on investment than Neiman Large. However, Penn National is 4.21 times more volatile than Neiman Large Cap. It trades about 0.02 of its potential returns per unit of risk. Neiman Large Cap is currently generating about -0.01 per unit of risk. If you would invest  1,848  in Penn National Gaming on October 8, 2024 and sell it today you would earn a total of  28.00  from holding Penn National Gaming or generate 1.52% 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.  Neiman Large Cap

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.

Neiman Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neiman Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Neiman Large 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 Neiman Large

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

The idea behind Penn National Gaming and Neiman Large Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.