Correlation Between Penn National and CPU SOFTWAREHOUSE

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

Diversification Opportunities for Penn National and CPU SOFTWAREHOUSE

-0.3

Correlation Coefficient

Penn National  CPU SOFTWAREHOUSE

Very good diversification

The 3 months correlation between Penn and CPU is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of Penn National i.e., Penn National and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between Penn National and CPU SOFTWAREHOUSE

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the CPU SOFTWAREHOUSE. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.81 times less risky than CPU SOFTWAREHOUSE. The stock trades about -0.02 of its potential returns per unit of risk. The CPU SOFTWAREHOUSE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  89.00  in CPU SOFTWAREHOUSE on October 8, 2024 and sell it today you would earn a total of  11.00  from holding CPU SOFTWAREHOUSE or generate 12.36% return on investment over 90 days.

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

Penn National Gaming  vs.  CPU SOFTWAREHOUSE

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 reported solid returns over the last few months and may actually be approaching a breakup point.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CPU SOFTWAREHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and CPU SOFTWAREHOUSE

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

The idea behind Penn National Gaming and CPU SOFTWAREHOUSE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.