Correlation Between Penn National and Sealed Air

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

Diversification Opportunities for Penn National and Sealed Air

0.52

Correlation Coefficient

Penn National  Sealed Air

Very weak diversification

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

Pair Corralation between Penn National and Sealed Air

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.69 times more return on investment than Sealed Air. However, Penn National is 1.69 times more volatile than Sealed Air. It trades about -0.04 of its potential returns per unit of risk. Sealed Air is currently generating about -0.1 per unit of risk. If you would invest  1,817  in Penn National Gaming on December 19, 2024 and sell it today you would lose (164.00) from holding Penn National Gaming or give up 9.03% of portfolio value over 90 days.

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

Penn National Gaming  vs.  Sealed Air

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.

Sealed Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Penn National and Sealed Air

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

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