Correlation Between Penn National and RETAIL FOOD

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

Diversification Opportunities for Penn National and RETAIL FOOD

0.65

Correlation Coefficient

Penn National  RETAIL FOOD

Poor diversification

The 3 months correlation between Penn and RETAIL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of Penn National i.e., Penn National and RETAIL FOOD go up and down completely randomly.

Pair Corralation between Penn National and RETAIL FOOD

Assuming the 90 days horizon Penn National Gaming is expected to generate 1.12 times more return on investment than RETAIL FOOD. However, Penn National is 1.12 times more volatile than RETAIL FOOD GROUP. It trades about -0.01 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about -0.02 per unit of risk. If you would invest  3,010  in Penn National Gaming on October 10, 2024 and sell it today you would lose (1,146) from holding Penn National Gaming or give up 38.07% of portfolio value over 90 days.

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

Penn National Gaming  vs.  RETAIL FOOD GROUP

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.

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Penn National and RETAIL FOOD

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

The idea behind Penn National Gaming and RETAIL FOOD GROUP 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.