Correlation Between Penn National and Grand Canyon

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

Diversification Opportunities for Penn National and Grand Canyon

0.74

Correlation Coefficient

Penn National  Grand Canyon

Poor diversification

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

Pair Corralation between Penn National and Grand Canyon

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Grand Canyon. In addition to that, Penn National is 2.02 times more volatile than Grand Canyon Education. It trades about -0.01 of its total potential returns per unit of risk. Grand Canyon Education is currently generating about 0.06 per unit of volatility. If you would invest  10,055  in Grand Canyon Education on October 11, 2024 and sell it today you would earn a total of  5,645  from holding Grand Canyon Education or generate 56.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Penn National Gaming  vs.  Grand Canyon Education

Penn National Gaming

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

Grand Canyon Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Grand Canyon

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

The idea behind Penn National Gaming and Grand Canyon Education 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.