Correlation Between Penn National and ReposiTrak

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

Diversification Opportunities for Penn National and ReposiTrak

0.29

Correlation Coefficient

Penn National  ReposiTrak

Modest diversification

The 3 months correlation between Penn and ReposiTrak is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and ReposiTrak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReposiTrak 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 ReposiTrak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReposiTrak has no effect on the direction of Penn National i.e., Penn National and ReposiTrak go up and down completely randomly.

Pair Corralation between Penn National and ReposiTrak

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.42 times more return on investment than ReposiTrak. However, Penn National is 1.42 times more volatile than ReposiTrak. It trades about -0.01 of its potential returns per unit of risk. ReposiTrak is currently generating about -0.07 per unit of risk. If you would invest  1,813  in Penn National Gaming on December 21, 2024 and sell it today you would lose (76.00) from holding Penn National Gaming or give up 4.19% of portfolio value over 90 days.

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

Penn National Gaming  vs.  ReposiTrak

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 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.

ReposiTrak

Risk-Adjusted Performance

Very Weak

Over the last 90 days ReposiTrak has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Penn National and ReposiTrak

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

The idea behind Penn National Gaming and ReposiTrak 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.