Correlation Between Penn National and Pimco High

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

Diversification Opportunities for Penn National and Pimco High

0.28

Correlation Coefficient

Penn National  Pimco High

Modest diversification

The 3 months correlation between Penn and Pimco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Pimco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco High Yield 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 Pimco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco High Yield has no effect on the direction of Penn National i.e., Penn National and Pimco High go up and down completely randomly.

Pair Corralation between Penn National and Pimco High

Given the investment horizon of 90 days Penn National Gaming is expected to generate 8.54 times more return on investment than Pimco High. However, Penn National is 8.54 times more volatile than Pimco High Yield. It trades about 0.02 of its potential returns per unit of risk. Pimco High Yield is currently generating about -0.06 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  Pimco High Yield

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.

Pimco High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco High 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 Pimco High

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

The idea behind Penn National Gaming and Pimco High Yield 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.