Correlation Between PENN Entertainment and DICKS Sporting

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

By analyzing existing cross correlation between PENN Entertainment and DICKS Sporting Goods, you can compare the effects of market volatilities on PENN Entertainment and DICKS Sporting 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 DICKS Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN Entertainment and DICKS Sporting.

Diversification Opportunities for PENN Entertainment and DICKS Sporting

0.81

Correlation Coefficient

PENN Entertainment  DICKS Sporting

Very poor diversification

The 3 months correlation between PENN and DICKS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and DICKS Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DICKS Sporting Goods 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 DICKS Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DICKS Sporting Goods has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and DICKS Sporting go up and down completely randomly.

Pair Corralation between PENN Entertainment and DICKS Sporting

Assuming the 90 days trading horizon PENN Entertainment is expected to generate 1.08 times more return on investment than DICKS Sporting. However, PENN Entertainment is 1.08 times more volatile than DICKS Sporting Goods. It trades about -0.07 of its potential returns per unit of risk. DICKS Sporting Goods is currently generating about -0.08 per unit of risk. If you would invest  1,732  in PENN Entertainment on December 21, 2024 and sell it today you would lose (240.00) from holding PENN Entertainment or give up 13.86% of portfolio value over 90 days.

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

PENN Entertainment  vs.  DICKS Sporting Goods

PENN Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

DICKS Sporting Goods

Risk-Adjusted Performance

Very Weak

Over the last 90 days DICKS Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PENN Entertainment and DICKS Sporting

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

The idea behind PENN Entertainment and DICKS Sporting Goods 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.