Correlation Between Penn National and FUTURE GAMING

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

Diversification Opportunities for Penn National and FUTURE GAMING

-0.62

Correlation Coefficient

Penn National  FUTURE GAMING

Excellent diversification

The 3 months correlation between Penn and FUTURE is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and FUTURE GAMING GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUTURE GAMING GRP 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 FUTURE GAMING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUTURE GAMING GRP has no effect on the direction of Penn National i.e., Penn National and FUTURE GAMING go up and down completely randomly.

Pair Corralation between Penn National and FUTURE GAMING

Assuming the 90 days horizon Penn National Gaming is expected to generate 0.68 times more return on investment than FUTURE GAMING. However, Penn National Gaming is 1.47 times less risky than FUTURE GAMING. It trades about 0.07 of its potential returns per unit of risk. FUTURE GAMING GRP is currently generating about -0.03 per unit of risk. If you would invest  1,772  in Penn National Gaming on September 16, 2024 and sell it today you would earn a total of  200.00  from holding Penn National Gaming or generate 11.29% return on investment over 90 days.

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

Penn National Gaming  vs.  FUTURE GAMING GRP

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FUTURE GAMING GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FUTURE GAMING GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Pair Trading with Penn National and FUTURE GAMING

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

The idea behind Penn National Gaming and FUTURE GAMING GRP 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.