Correlation Between PENN NATL and Thermo Fisher

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

Diversification Opportunities for PENN NATL and Thermo Fisher

-0.76

Correlation Coefficient

PENN NATL  Thermo Fisher

Pay attention - limited upside

The 3 months correlation between PENN and Thermo is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of PENN NATL i.e., PENN NATL and Thermo Fisher go up and down completely randomly.

Pair Corralation between PENN NATL and Thermo Fisher

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Thermo Fisher. In addition to that, PENN NATL is 2.38 times more volatile than Thermo Fisher Scientific. It trades about -0.04 of its total potential returns per unit of risk. Thermo Fisher Scientific is currently generating about 0.15 per unit of volatility. If you would invest  50,611  in Thermo Fisher Scientific on October 9, 2024 and sell it today you would earn a total of  1,889  from holding Thermo Fisher Scientific or generate 3.73% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Thermo Fisher Scientific

PENN NATL GAMING

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PENN NATL and Thermo Fisher

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

The idea behind PENN NATL GAMING and Thermo Fisher Scientific 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.