Correlation Between Penn National and TRADEGATE

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

Diversification Opportunities for Penn National and TRADEGATE

0.45

Correlation Coefficient

Penn National  TRADEGATE

Very weak diversification

The 3 months correlation between Penn and TRADEGATE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and TRADEGATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRADEGATE 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 TRADEGATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRADEGATE has no effect on the direction of Penn National i.e., Penn National and TRADEGATE go up and down completely randomly.

Pair Corralation between Penn National and TRADEGATE

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the TRADEGATE. In addition to that, Penn National is 13.16 times more volatile than TRADEGATE. It trades about -0.25 of its total potential returns per unit of risk. TRADEGATE is currently generating about -0.14 per unit of volatility. If you would invest  9,050  in TRADEGATE on October 5, 2024 and sell it today you would lose (50.00) from holding TRADEGATE or give up 0.55% 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.  TRADEGATE

Penn National Gaming

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TRADEGATE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRADEGATE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TRADEGATE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Penn National and TRADEGATE

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

The idea behind Penn National Gaming and TRADEGATE 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.