Correlation Between Penn National and AEGEAN AIRLINES

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

Diversification Opportunities for Penn National and AEGEAN AIRLINES

-0.54

Correlation Coefficient

Penn National  AEGEAN AIRLINES

Excellent diversification

The 3 months correlation between Penn and AEGEAN is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of Penn National i.e., Penn National and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between Penn National and AEGEAN AIRLINES

Assuming the 90 days horizon Penn National Gaming is expected to generate 2.12 times more return on investment than AEGEAN AIRLINES. However, Penn National is 2.12 times more volatile than AEGEAN AIRLINES. It trades about 0.08 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about 0.04 per unit of risk. If you would invest  1,761  in Penn National Gaming on October 25, 2024 and sell it today you would earn a total of  212.00  from holding Penn National Gaming or generate 12.04% return on investment over 90 days.

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

Penn National Gaming  vs.  AEGEAN AIRLINES

Penn National Gaming

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

AEGEAN AIRLINES

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AEGEAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Penn National and AEGEAN AIRLINES

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

The idea behind Penn National Gaming and AEGEAN AIRLINES 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.