Correlation Between PENN NATL and DevEx Resources

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

Diversification Opportunities for PENN NATL and DevEx Resources

-0.08

Correlation Coefficient

PENN NATL  DevEx Resources

Good diversification

The 3 months correlation between PENN and DevEx is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and DevEx Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DevEx Resources 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 DevEx Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DevEx Resources has no effect on the direction of PENN NATL i.e., PENN NATL and DevEx Resources go up and down completely randomly.

Pair Corralation between PENN NATL and DevEx Resources

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the DevEx Resources. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 3.34 times less risky than DevEx Resources. The stock trades about -0.04 of its potential returns per unit of risk. The DevEx Resources Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5.40  in DevEx Resources Limited on December 28, 2024 and sell it today you would lose (0.45) from holding DevEx Resources Limited or give up 8.33% of portfolio value over 90 days.

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

PENN NATL GAMING  vs.  DevEx Resources Limited

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 unsteady 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.

DevEx Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DevEx Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DevEx Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and DevEx Resources

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

The idea behind PENN NATL GAMING and DevEx Resources 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.