Correlation Between PENN NATL and SPARTAN STORES

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

Diversification Opportunities for PENN NATL and SPARTAN STORES

-0.69

Correlation Coefficient

PENN NATL  SPARTAN STORES

Excellent diversification

The 3 months correlation between PENN and SPARTAN is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of PENN NATL i.e., PENN NATL and SPARTAN STORES go up and down completely randomly.

Pair Corralation between PENN NATL and SPARTAN STORES

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.62 times more return on investment than SPARTAN STORES. However, PENN NATL is 1.62 times more volatile than SPARTAN STORES. It trades about -0.01 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.03 per unit of risk. If you would invest  2,909  in PENN NATL GAMING on October 11, 2024 and sell it today you would lose (1,083) from holding PENN NATL GAMING or give up 37.23% of portfolio value over 90 days.

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

PENN NATL GAMING  vs.  SPARTAN STORES

PENN NATL GAMING

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PENN NATL and SPARTAN STORES

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

The idea behind PENN NATL GAMING and SPARTAN 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.