Correlation Between Penn National and EHEALTH

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

Diversification Opportunities for Penn National and EHEALTH

0.48

Correlation Coefficient

Penn National  EHEALTH

Very weak diversification

The 3 months correlation between Penn and EHEALTH is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and EHEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHEALTH 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 EHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EHEALTH has no effect on the direction of Penn National i.e., Penn National and EHEALTH go up and down completely randomly.

Pair Corralation between Penn National and EHEALTH

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the EHEALTH. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 3.17 times less risky than EHEALTH. The stock trades about -0.16 of its potential returns per unit of risk. The EHEALTH is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  473.00  in EHEALTH on September 24, 2024 and sell it today you would earn a total of  306.00  from holding EHEALTH or generate 64.69% return on investment over 90 days.

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

Penn National Gaming  vs.  EHEALTH

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.

EHEALTH

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EHEALTH are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, EHEALTH exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and EHEALTH

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

The idea behind Penn National Gaming and EHEALTH 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.