Correlation Between PENN NATL and Strategic Investments

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

Diversification Opportunities for PENN NATL and Strategic Investments

0.5

Correlation Coefficient

PENN NATL  Strategic Investments

Very weak diversification

The 3 months correlation between PENN and Strategic is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of PENN NATL i.e., PENN NATL and Strategic Investments go up and down completely randomly.

Pair Corralation between PENN NATL and Strategic Investments

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Strategic Investments. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 2.78 times less risky than Strategic Investments. The stock trades about -0.05 of its potential returns per unit of risk. The Strategic Investments AS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Strategic Investments AS on December 29, 2024 and sell it today you would lose (2.00) from holding Strategic Investments AS or give up 14.29% of portfolio value over 90 days.

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

PENN NATL GAMING  vs.  Strategic Investments AS

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.

Strategic Investments

Risk-Adjusted Performance

Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Strategic Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PENN NATL and Strategic Investments

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

The idea behind PENN NATL GAMING and Strategic Investments AS 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.