Correlation Between Penn National and Packagingof America

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

Diversification Opportunities for Penn National and Packagingof America

0.87

Correlation Coefficient

Penn National  Packagingof America

Very poor diversification

The 3 months correlation between Penn and Packagingof is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Packaging of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packagingof America 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 Packagingof America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packagingof America has no effect on the direction of Penn National i.e., Penn National and Packagingof America go up and down completely randomly.

Pair Corralation between Penn National and Packagingof America

Assuming the 90 days horizon Penn National Gaming is expected to generate 2.24 times more return on investment than Packagingof America. However, Penn National is 2.24 times more volatile than Packaging of. It trades about 0.08 of its potential returns per unit of risk. Packaging of is currently generating about 0.16 per unit of risk. If you would invest  1,672  in Penn National Gaming on October 8, 2024 and sell it today you would earn a total of  192.00  from holding Penn National Gaming or generate 11.48% return on investment over 90 days.

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

Penn National Gaming  vs.  Packaging of

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.

Packagingof America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Packagingof America reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Packagingof America

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

The idea behind Penn National Gaming and Packaging of 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 Commodity Directory module to find actively traded commodities issued by global exchanges.