Correlation Between PENN NATL and BlueScope Steel

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

Diversification Opportunities for PENN NATL and BlueScope Steel

0.0

Correlation Coefficient

PENN NATL  BlueScope Steel

Pay attention - limited upside

The 3 months correlation between PENN and BlueScope is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of PENN NATL i.e., PENN NATL and BlueScope Steel go up and down completely randomly.

Pair Corralation between PENN NATL and BlueScope Steel

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.12 times more return on investment than BlueScope Steel. However, PENN NATL is 1.12 times more volatile than BlueScope Steel Limited. It trades about 0.08 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about -0.12 per unit of risk. If you would invest  1,717  in PENN NATL GAMING on October 5, 2024 and sell it today you would earn a total of  179.00  from holding PENN NATL GAMING or generate 10.43% return on investment over 90 days.

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

PENN NATL GAMING  vs.  BlueScope Steel Limited

PENN NATL GAMING

Risk-Adjusted Performance

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Modest

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 rather uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PENN NATL and BlueScope Steel

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

The idea behind PENN NATL GAMING and BlueScope Steel Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.