Correlation Between Amazon and Penn National

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Can any of the company-specific risk be diversified away by investing in both Amazon and Penn National 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 Amazon and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Penn National Gaming, you can compare the effects of market volatilities on Amazon and Penn National 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 Amazon with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Penn National.

Diversification Opportunities for Amazon and Penn National

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Penn National is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and Amazon 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 Amazon Inc are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Amazon i.e., Amazon and Penn National go up and down completely randomly.

Pair Corralation between Amazon and Penn National

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Penn National. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.05 times less risky than Penn National. The stock trades about -0.2 of its potential returns per unit of risk. The Penn National Gaming is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,301  in Penn National Gaming on September 11, 2022 and sell it today you would earn a total of  0.00  from holding Penn National Gaming or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Penn National Gaming

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Penn National Gaming 
Penn National Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Penn National is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Penn National Price Channel

Amazon and Penn National Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Penn National

The main advantage of trading using opposite Amazon and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Penn National 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 National will offset losses from the drop in Penn National's long position.
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The idea behind Amazon Inc and Penn National 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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