Correlation Between Penn National and Vanguard Mega

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

Diversification Opportunities for Penn National and Vanguard Mega

0.27

Correlation Coefficient

Penn National  Vanguard Mega

Modest diversification

The 3 months correlation between Penn and Vanguard is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap 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 Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of Penn National i.e., Penn National and Vanguard Mega go up and down completely randomly.

Pair Corralation between Penn National and Vanguard Mega

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Vanguard Mega. In addition to that, Penn National is 2.54 times more volatile than Vanguard Mega Cap. It trades about -0.08 of its total potential returns per unit of risk. Vanguard Mega Cap is currently generating about -0.02 per unit of volatility. If you would invest  69,620  in Vanguard Mega Cap on October 8, 2024 and sell it today you would lose (460.00) from holding Vanguard Mega Cap or give up 0.66% 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.  Vanguard Mega Cap

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

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.

Vanguard Mega Cap

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mega may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penn National and Vanguard Mega

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

The idea behind Penn National Gaming and Vanguard Mega Cap 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..