Correlation Between PENN NATL and Caseys General

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

Diversification Opportunities for PENN NATL and Caseys General

0.82

Correlation Coefficient

PENN NATL  Caseys General

Very poor diversification

The 3 months correlation between PENN and Caseys is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Caseys General Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caseys General Stores 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 Caseys General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caseys General Stores has no effect on the direction of PENN NATL i.e., PENN NATL and Caseys General go up and down completely randomly.

Pair Corralation between PENN NATL and Caseys General

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.73 times more return on investment than Caseys General. However, PENN NATL is 1.73 times more volatile than Caseys General Stores. It trades about -0.03 of its potential returns per unit of risk. Caseys General Stores is currently generating about -0.06 per unit of risk. If you would invest  1,736  in PENN NATL GAMING on December 20, 2024 and sell it today you would lose (146.00) from holding PENN NATL GAMING or give up 8.41% of portfolio value over 90 days.

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

PENN NATL GAMING  vs.  Caseys General Stores

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.

Caseys General Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caseys General Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PENN NATL and Caseys General

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

The idea behind PENN NATL GAMING and Caseys General Stores 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.