Correlation Between PENN Entertainment and USWE SPORTS

Can any of the company-specific risk be diversified away by investing in both PENN Entertainment and USWE SPORTS 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 Entertainment and USWE SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PENN Entertainment and USWE SPORTS AB, you can compare the effects of market volatilities on PENN Entertainment and USWE SPORTS 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 Entertainment with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN Entertainment and USWE SPORTS.

Diversification Opportunities for PENN Entertainment and USWE SPORTS

0.76

Correlation Coefficient

PENN Entertainment  USWE SPORTS

Poor diversification

The 3 months correlation between PENN and USWE is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and PENN Entertainment 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 Entertainment are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and USWE SPORTS go up and down completely randomly.

Pair Corralation between PENN Entertainment and USWE SPORTS

Assuming the 90 days trading horizon PENN Entertainment is expected to generate 3.23 times less return on investment than USWE SPORTS. But when comparing it to its historical volatility, PENN Entertainment is 1.09 times less risky than USWE SPORTS. It trades about 0.05 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  57.00  in USWE SPORTS AB on October 8, 2024 and sell it today you would earn a total of  18.00  from holding USWE SPORTS AB or generate 31.58% return on investment over 90 days.

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

PENN Entertainment  vs.  USWE SPORTS AB

PENN Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

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

USWE SPORTS AB

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with PENN Entertainment and USWE SPORTS

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

The idea behind PENN Entertainment and USWE SPORTS AB 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.