Correlation Between Penn National and PLAYMATES TOYS

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

Diversification Opportunities for Penn National and PLAYMATES TOYS

-0.31

Correlation Coefficient

Penn National  PLAYMATES TOYS

Very good diversification

The 3 months correlation between Penn and PLAYMATES is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of Penn National i.e., Penn National and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between Penn National and PLAYMATES TOYS

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the PLAYMATES TOYS. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.04 times less risky than PLAYMATES TOYS. The stock trades about -0.25 of its potential returns per unit of risk. The PLAYMATES TOYS is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  6.85  in PLAYMATES TOYS on October 5, 2024 and sell it today you would lose (0.65) from holding PLAYMATES TOYS or give up 9.49% of portfolio value over 90 days.

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

Penn National Gaming  vs.  PLAYMATES TOYS

Penn National Gaming

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Penn National and PLAYMATES TOYS

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

The idea behind Penn National Gaming and PLAYMATES TOYS 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.