Correlation Between Penn National and Rayonier Advanced

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

Diversification Opportunities for Penn National and Rayonier Advanced

0.5

Correlation Coefficient

Penn National  Rayonier Advanced

Very weak diversification

The 3 months correlation between Penn and Rayonier is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Penn National i.e., Penn National and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Penn National and Rayonier Advanced

Assuming the 90 days horizon Penn National Gaming is expected to generate 1.53 times more return on investment than Rayonier Advanced. However, Penn National is 1.53 times more volatile than Rayonier Advanced Materials. It trades about -0.21 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about -0.33 per unit of risk. If you would invest  2,038  in Penn National Gaming on October 3, 2024 and sell it today you would lose (263.00) from holding Penn National Gaming or give up 12.9% of portfolio value over 90 days.

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

Penn National Gaming  vs.  Rayonier Advanced Materials

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Penn National Gaming and Rayonier Advanced Materials 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.

Check out your portfolio center.

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..