Correlation Between Penn National and RBC PHN

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

Diversification Opportunities for Penn National and RBC PHN

-0.15

Correlation Coefficient

Penn National  RBC PHN

Good diversification

The 3 months correlation between Penn and RBC is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and RBC PHN Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC PHN Short 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 RBC PHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC PHN Short has no effect on the direction of Penn National i.e., Penn National and RBC PHN go up and down completely randomly.

Pair Corralation between Penn National and RBC PHN

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the RBC PHN. In addition to that, Penn National is 19.41 times more volatile than RBC PHN Short. It trades about -0.03 of its total potential returns per unit of risk. RBC PHN Short is currently generating about 0.18 per unit of volatility. If you would invest  1,979  in RBC PHN Short on December 27, 2024 and sell it today you would earn a total of  34.00  from holding RBC PHN Short or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Penn National Gaming  vs.  RBC PHN Short

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.

RBC PHN Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC PHN Short are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC PHN is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Penn National and RBC PHN

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

The idea behind Penn National Gaming and RBC PHN Short 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.