Correlation Between PENN Entertainment and SPARTAN STORES

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

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

Diversification Opportunities for PENN Entertainment and SPARTAN STORES

0.04

Correlation Coefficient

PENN Entertainment  SPARTAN STORES

Significant diversification

The 3 months correlation between PENN and SPARTAN is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and SPARTAN STORES go up and down completely randomly.

Pair Corralation between PENN Entertainment and SPARTAN STORES

Assuming the 90 days trading horizon PENN Entertainment is expected to under-perform the SPARTAN STORES. In addition to that, PENN Entertainment is 1.34 times more volatile than SPARTAN STORES. It trades about -0.07 of its total potential returns per unit of risk. SPARTAN STORES is currently generating about 0.01 per unit of volatility. If you would invest  1,830  in SPARTAN STORES on December 22, 2024 and sell it today you would earn a total of  0.00  from holding SPARTAN STORES or generate 0.0% return on investment over 90 days.

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

PENN Entertainment  vs.  SPARTAN STORES

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 weak 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.

SPARTAN STORES

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PENN Entertainment and SPARTAN STORES

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

The idea behind PENN Entertainment and SPARTAN STORES 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.