Correlation Between Penn National and DISTRICT METALS

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

Diversification Opportunities for Penn National and DISTRICT METALS

-0.34

Correlation Coefficient

Penn National  DISTRICT METALS

Very good diversification

The 3 months correlation between Penn and DISTRICT is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS 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 DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of Penn National i.e., Penn National and DISTRICT METALS go up and down completely randomly.

Pair Corralation between Penn National and DISTRICT METALS

Assuming the 90 days horizon Penn National Gaming is expected to generate 0.65 times more return on investment than DISTRICT METALS. However, Penn National Gaming is 1.53 times less risky than DISTRICT METALS. It trades about 0.01 of its potential returns per unit of risk. DISTRICT METALS is currently generating about -0.01 per unit of risk. If you would invest  2,066  in Penn National Gaming on December 5, 2024 and sell it today you would lose (23.00) from holding Penn National Gaming or give up 1.11% of portfolio value over 90 days.

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

Penn National Gaming  vs.  DISTRICT METALS

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 nearly stable basic indicators, Penn National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DISTRICT METALS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Penn National and DISTRICT METALS

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

The idea behind Penn National Gaming and DISTRICT METALS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.