Correlation Between PENN NATL and GAMESTOP

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

Diversification Opportunities for PENN NATL and GAMESTOP

0.67

Correlation Coefficient

PENN NATL  GAMESTOP

Poor diversification

The 3 months correlation between PENN and GAMESTOP is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP 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 GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of PENN NATL i.e., PENN NATL and GAMESTOP go up and down completely randomly.

Pair Corralation between PENN NATL and GAMESTOP

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the GAMESTOP. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 1.17 times less risky than GAMESTOP. The stock trades about -0.16 of its potential returns per unit of risk. The GAMESTOP is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,718  in GAMESTOP on October 6, 2024 and sell it today you would earn a total of  317.00  from holding GAMESTOP or generate 11.66% return on investment over 90 days.

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

PENN NATL GAMING  vs.  GAMESTOP

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 uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GAMESTOP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GAMESTOP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and GAMESTOP

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

The idea behind PENN NATL GAMING and GAMESTOP 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.