Correlation Between Penn National and OPKO HEALTH

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

Diversification Opportunities for Penn National and OPKO HEALTH

-0.18

Correlation Coefficient

Penn National  OPKO HEALTH

Good diversification

The 3 months correlation between Penn and OPKO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and OPKO HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPKO HEALTH 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 OPKO HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPKO HEALTH has no effect on the direction of Penn National i.e., Penn National and OPKO HEALTH go up and down completely randomly.

Pair Corralation between Penn National and OPKO HEALTH

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the OPKO HEALTH. In addition to that, Penn National is 1.7 times more volatile than OPKO HEALTH. It trades about -0.02 of its total potential returns per unit of risk. OPKO HEALTH is currently generating about 0.09 per unit of volatility. If you would invest  151.00  in OPKO HEALTH on December 20, 2024 and sell it today you would earn a total of  14.00  from holding OPKO HEALTH or generate 9.27% return on investment over 90 days.

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

Penn National Gaming  vs.  OPKO HEALTH

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.

OPKO HEALTH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OPKO HEALTH are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, OPKO HEALTH may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Penn National and OPKO HEALTH

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

The idea behind Penn National Gaming and OPKO HEALTH 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.