Correlation Between Nike and Penn Entertainment

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

Diversification Opportunities for Nike and Penn Entertainment

0.81
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between Nike and Penn Entertainment

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Penn Entertainment. In addition to that, Nike is 1.0 times more volatile than Penn Entertainment. It trades about -0.16 of its total potential returns per unit of risk. Penn Entertainment is currently generating about 0.06 per unit of volatility. If you would invest  3,086  in Penn Entertainment on July 8, 2022 and sell it today you would earn a total of  104.00  from holding Penn Entertainment or generate 3.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Penn Entertainment

 Performance (%) 
       Timeline  
Nike Inc 
Nike Performance
0 of 100
Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nike Price Channel

Penn Entertainment 
Penn Entertainment Performance
2 of 100
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. Despite quite conflicting basic indicators, Penn Entertainment may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Penn Entertainment Price Channel

Nike and Penn Entertainment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Penn Entertainment

The main advantage of trading using opposite Nike and Penn Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Penn Entertainment 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 Entertainment will offset losses from the drop in Penn Entertainment's long position.
Nike vs. Amazon Inc
The idea behind Nike Inc and Penn Entertainment 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.
Penn Entertainment vs. Amazon Inc
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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