Correlation Between Penn National and Prosus NV

Can any of the company-specific risk be diversified away by investing in both Penn National and Prosus NV 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 National and Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penn National Gaming and Prosus NV, you can compare the effects of market volatilities on Penn National and Prosus NV 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 National with a short position of Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Prosus NV.

Diversification Opportunities for Penn National and Prosus NV

-0.24

Correlation Coefficient

Penn National  Prosus NV

Very good diversification

The 3 months correlation between Penn and Prosus is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and Penn National 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 National Gaming are associated (or correlated) with Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Penn National i.e., Penn National and Prosus NV go up and down completely randomly.

Pair Corralation between Penn National and Prosus NV

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Prosus NV. In addition to that, Penn National is 1.22 times more volatile than Prosus NV. It trades about -0.04 of its total potential returns per unit of risk. Prosus NV is currently generating about 0.09 per unit of volatility. If you would invest  3,852  in Prosus NV on December 28, 2024 and sell it today you would earn a total of  478.00  from holding Prosus NV or generate 12.41% return on investment over 90 days.

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

Penn National Gaming  vs.  Prosus NV

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Prosus NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosus NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Prosus NV

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

The idea behind Penn National Gaming and Prosus NV 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.