Correlation Between Penn National and Levi Strauss

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

Diversification Opportunities for Penn National and Levi Strauss

-0.47

Correlation Coefficient

Penn National  Levi Strauss

Very good diversification

The 3 months correlation between Penn and Levi is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of Penn National i.e., Penn National and Levi Strauss go up and down completely randomly.

Pair Corralation between Penn National and Levi Strauss

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Levi Strauss. In addition to that, Penn National is 2.13 times more volatile than Levi Strauss Co. It trades about -0.02 of its total potential returns per unit of risk. Levi Strauss Co is currently generating about 0.03 per unit of volatility. If you would invest  1,677  in Levi Strauss Co on October 8, 2024 and sell it today you would earn a total of  12.00  from holding Levi Strauss Co or generate 0.72% return on investment over 90 days.

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

Penn National Gaming  vs.  Levi Strauss Co

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.

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Levi Strauss 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 Levi Strauss

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

The idea behind Penn National Gaming and Levi Strauss Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.