Correlation Between Penn National and Star Combo

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

Diversification Opportunities for Penn National and Star Combo

-0.52

Correlation Coefficient

Penn National  Star Combo

Excellent diversification

The 3 months correlation between Penn and Star is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Star Combo Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Combo Pharma 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 Star Combo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Combo Pharma has no effect on the direction of Penn National i.e., Penn National and Star Combo go up and down completely randomly.

Pair Corralation between Penn National and Star Combo

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Star Combo. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.91 times less risky than Star Combo. The stock trades about -0.05 of its potential returns per unit of risk. The Star Combo Pharma is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Star Combo Pharma on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Star Combo Pharma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  Star Combo Pharma

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.

Star Combo Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Combo Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Star Combo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Penn National and Star Combo

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

The idea behind Penn National Gaming and Star Combo Pharma 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.