Correlation Between Penn National and Gateway Real

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

Diversification Opportunities for Penn National and Gateway Real

-0.58

Correlation Coefficient

Penn National  Gateway Real

Excellent diversification

The 3 months correlation between Penn and Gateway is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Gateway Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Real Estate 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 Gateway Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Real Estate has no effect on the direction of Penn National i.e., Penn National and Gateway Real go up and down completely randomly.

Pair Corralation between Penn National and Gateway Real

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Gateway Real. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 5.14 times less risky than Gateway Real. The stock trades about -0.01 of its potential returns per unit of risk. The Gateway Real Estate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  398.00  in Gateway Real Estate on September 24, 2024 and sell it today you would lose (355.00) from holding Gateway Real Estate or give up 89.2% of portfolio value over 90 days.

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

Penn National Gaming  vs.  Gateway Real Estate

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Gateway Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gateway Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Penn National and Gateway Real

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

The idea behind Penn National Gaming and Gateway Real Estate 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..