Correlation Between PENN NATL and Air New

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

Diversification Opportunities for PENN NATL and Air New

0.23

Correlation Coefficient

PENN NATL  Air New

Modest diversification

The 3 months correlation between PENN and Air is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of PENN NATL i.e., PENN NATL and Air New go up and down completely randomly.

Pair Corralation between PENN NATL and Air New

Assuming the 90 days trading horizon PENN NATL is expected to generate 1.32 times less return on investment than Air New. In addition to that, PENN NATL is 1.1 times more volatile than Air New Zealand. It trades about 0.07 of its total potential returns per unit of risk. Air New Zealand is currently generating about 0.1 per unit of volatility. If you would invest  30.00  in Air New Zealand on October 7, 2024 and sell it today you would earn a total of  3.00  from holding Air New Zealand or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PENN NATL GAMING  vs.  Air New Zealand

PENN NATL GAMING

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Air New Zealand

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air New may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PENN NATL and Air New

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

The idea behind PENN NATL GAMING and Air New Zealand 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.