Correlation Between Penn National and CITY OFFICE

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

Diversification Opportunities for Penn National and CITY OFFICE

0.33

Correlation Coefficient

Penn National  CITY OFFICE

Weak diversification

The 3 months correlation between Penn and CITY is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT 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 CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of Penn National i.e., Penn National and CITY OFFICE go up and down completely randomly.

Pair Corralation between Penn National and CITY OFFICE

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the CITY OFFICE. In addition to that, Penn National is 1.31 times more volatile than CITY OFFICE REIT. It trades about -0.04 of its total potential returns per unit of risk. CITY OFFICE REIT is currently generating about -0.04 per unit of volatility. If you would invest  495.00  in CITY OFFICE REIT on December 20, 2024 and sell it today you would lose (35.00) from holding CITY OFFICE REIT or give up 7.07% of portfolio value over 90 days.

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

Penn National Gaming  vs.  CITY OFFICE REIT

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 fragile 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.

CITY OFFICE REIT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Penn National and CITY OFFICE

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

The idea behind Penn National Gaming and CITY OFFICE REIT 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.