Correlation Between Treasury Wine and PENN NATL

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

By analyzing existing cross correlation between Treasury Wine Estates and PENN NATL GAMING, you can compare the effects of market volatilities on Treasury Wine and PENN NATL 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 Treasury Wine with a short position of PENN NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and PENN NATL.

Diversification Opportunities for Treasury Wine and PENN NATL

-0.52

Correlation Coefficient

Treasury Wine  PENN NATL

Excellent diversification

The 3 months correlation between Treasury and PENN is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING and Treasury Wine 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 Treasury Wine Estates are associated (or correlated) with PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Treasury Wine i.e., Treasury Wine and PENN NATL go up and down completely randomly.

Pair Corralation between Treasury Wine and PENN NATL

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the PENN NATL. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 3.36 times less risky than PENN NATL. The stock trades about -0.37 of its potential returns per unit of risk. The PENN NATL GAMING is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,872  in PENN NATL GAMING on October 11, 2024 and sell it today you would lose (46.00) from holding PENN NATL GAMING or give up 2.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Treasury Wine Estates  vs.  PENN NATL GAMING

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PENN NATL GAMING

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Treasury Wine and PENN NATL

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

The idea behind Treasury Wine Estates and PENN NATL GAMING 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.