Correlation Between Penn National and Atmos Energy

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

Diversification Opportunities for Penn National and Atmos Energy

0.74

Correlation Coefficient

Penn National  Atmos Energy

Poor diversification

The 3 months correlation between Penn and Atmos is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Penn National i.e., Penn National and Atmos Energy go up and down completely randomly.

Pair Corralation between Penn National and Atmos Energy

Assuming the 90 days horizon Penn National Gaming is expected to generate 2.66 times more return on investment than Atmos Energy. However, Penn National is 2.66 times more volatile than Atmos Energy. It trades about 0.17 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.24 per unit of risk. If you would invest  1,781  in Penn National Gaming on October 23, 2024 and sell it today you would earn a total of  148.00  from holding Penn National Gaming or generate 8.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Penn National Gaming  vs.  Atmos Energy

Penn National Gaming

Risk-Adjusted Performance

5 of 100

OK

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.

Atmos Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penn National and Atmos Energy

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

The idea behind Penn National Gaming and Atmos Energy 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.