Correlation Between Penn National and Boiron SA
Can any of the company-specific risk be diversified away by investing in both Penn National and Boiron SA 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 Boiron SA 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 Boiron SA, you can compare the effects of market volatilities on Penn National and Boiron SA 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 Boiron SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Boiron SA.
Diversification Opportunities for Penn National and Boiron SA
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Penn and Boiron is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Boiron SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boiron SA 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 Boiron SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boiron SA has no effect on the direction of Penn National i.e., Penn National and Boiron SA go up and down completely randomly.
Pair Corralation between Penn National and Boiron SA
Assuming the 90 days horizon Penn National Gaming is expected to generate 1.4 times more return on investment than Boiron SA. However, Penn National is 1.4 times more volatile than Boiron SA. It trades about 0.04 of its potential returns per unit of risk. Boiron SA is currently generating about -0.14 per unit of risk. If you would invest 1,705 in Penn National Gaming on October 5, 2024 and sell it today you would earn a total of 70.00 from holding Penn National Gaming or generate 4.11% 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. Boiron SA
Performance |
Timeline |
Penn National Gaming |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Boiron SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Penn National and Boiron SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Penn National and Boiron SA
The main advantage of trading using opposite Penn National and Boiron SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Boiron SA 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 Boiron SA will offset losses from the drop in Boiron SA's long position.The idea behind Penn National Gaming and Boiron SA 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.Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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