Correlation Between PENN NATL and Raytheon Technologies

Can any of the company-specific risk be diversified away by investing in both PENN NATL and Raytheon Technologies 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 NATL and Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PENN NATL GAMING and Raytheon Technologies Corp, you can compare the effects of market volatilities on PENN NATL and Raytheon Technologies 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 NATL with a short position of Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Raytheon Technologies.

Diversification Opportunities for PENN NATL and Raytheon Technologies

-0.05

Correlation Coefficient

PENN NATL  Raytheon Technologies

Good diversification

The 3 months correlation between PENN and Raytheon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and PENN NATL 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 NATL GAMING are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of PENN NATL i.e., PENN NATL and Raytheon Technologies go up and down completely randomly.

Pair Corralation between PENN NATL and Raytheon Technologies

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Raytheon Technologies. In addition to that, PENN NATL is 2.03 times more volatile than Raytheon Technologies Corp. It trades about -0.05 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.12 per unit of volatility. If you would invest  11,196  in Raytheon Technologies Corp on December 30, 2024 and sell it today you would earn a total of  1,198  from holding Raytheon Technologies Corp or generate 10.7% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Raytheon Technologies Corp

PENN NATL GAMING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN NATL 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Raytheon Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PENN NATL and Raytheon Technologies

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

The idea behind PENN NATL GAMING and Raytheon Technologies Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.