Correlation Between PENN NATL and REINET INVESTMENTS

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

Diversification Opportunities for PENN NATL and REINET INVESTMENTS

0.32

Correlation Coefficient

PENN NATL  REINET INVESTMENTS

Weak diversification

The 3 months correlation between PENN and REINET is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and REINET INVESTMENTS SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REINET INVESTMENTS SCA 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 REINET INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REINET INVESTMENTS SCA has no effect on the direction of PENN NATL i.e., PENN NATL and REINET INVESTMENTS go up and down completely randomly.

Pair Corralation between PENN NATL and REINET INVESTMENTS

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the REINET INVESTMENTS. In addition to that, PENN NATL is 1.1 times more volatile than REINET INVESTMENTS SCA. It trades about -0.11 of its total potential returns per unit of risk. REINET INVESTMENTS SCA is currently generating about -0.02 per unit of volatility. If you would invest  2,440  in REINET INVESTMENTS SCA on October 9, 2024 and sell it today you would lose (40.00) from holding REINET INVESTMENTS SCA or give up 1.64% of portfolio value over 90 days.

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

PENN NATL GAMING  vs.  REINET INVESTMENTS SCA

PENN NATL GAMING

Risk-Adjusted Performance

4 of 100

Modest

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.

REINET INVESTMENTS SCA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REINET INVESTMENTS SCA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, REINET INVESTMENTS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PENN NATL and REINET INVESTMENTS

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

The idea behind PENN NATL GAMING and REINET INVESTMENTS SCA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.