Correlation Between Penn National and Patria Investments

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

Diversification Opportunities for Penn National and Patria Investments

0.26

Correlation Coefficient

Penn National  Patria Investments

Modest diversification

The 3 months correlation between Penn and Patria is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Penn National i.e., Penn National and Patria Investments go up and down completely randomly.

Pair Corralation between Penn National and Patria Investments

Given the investment horizon of 90 days Penn National is expected to generate 2.99 times less return on investment than Patria Investments. In addition to that, Penn National is 1.79 times more volatile than Patria Investments Limited. It trades about 0.04 of its total potential returns per unit of risk. Patria Investments Limited is currently generating about 0.22 per unit of volatility. If you would invest  2,950  in Patria Investments Limited on October 8, 2024 and sell it today you would earn a total of  638.00  from holding Patria Investments Limited or generate 21.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Penn National Gaming  vs.  Patria Investments Limited

Penn National Gaming

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Patria Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Patria Investments

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

The idea behind Penn National Gaming and Patria Investments Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.