Correlation Between PENN Entertainment and Urban Outfitters

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

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

Diversification Opportunities for PENN Entertainment and Urban Outfitters

0.11

Correlation Coefficient

PENN Entertainment  Urban Outfitters

Average diversification

The 3 months correlation between PENN and Urban is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters 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 Urban Outfitters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Outfitters has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and Urban Outfitters go up and down completely randomly.

Pair Corralation between PENN Entertainment and Urban Outfitters

Assuming the 90 days trading horizon PENN Entertainment is expected to generate 1.67 times less return on investment than Urban Outfitters. In addition to that, PENN Entertainment is 1.2 times more volatile than Urban Outfitters. It trades about 0.11 of its total potential returns per unit of risk. Urban Outfitters is currently generating about 0.21 per unit of volatility. If you would invest  5,300  in Urban Outfitters on October 26, 2024 and sell it today you would earn a total of  550.00  from holding Urban Outfitters or generate 10.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

PENN Entertainment  vs.  Urban Outfitters

PENN Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment are ranked lower than 2 (%) 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.

Urban Outfitters

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Outfitters are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Urban Outfitters reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN Entertainment and Urban Outfitters

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

The idea behind PENN Entertainment and Urban Outfitters 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.