Correlation Between PENN NATL and Transport International

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

Diversification Opportunities for PENN NATL and Transport International

-0.08

Correlation Coefficient

PENN NATL  Transport International

Good diversification

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

Pair Corralation between PENN NATL and Transport International

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Transport International. In addition to that, PENN NATL is 1.52 times more volatile than Transport International Holdings. It trades about -0.05 of its total potential returns per unit of risk. Transport International Holdings is currently generating about 0.01 per unit of volatility. If you would invest  94.00  in Transport International Holdings on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Transport International Holdings or generate 0.0% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Transport International Holdin

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 uncertain 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.

Transport International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International 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 Transport International

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

The idea behind PENN NATL GAMING and Transport International Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.