Correlation Between Penn National and Amazon

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

Diversification Opportunities for Penn National and Amazon

-0.59
  Correlation Coefficient

Excellent diversification

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

Pair Corralation between Penn National and Amazon

Given the investment horizon of 90 days Penn National is expected to generate 1.46 times less return on investment than Amazon. But when comparing it to its historical volatility, Penn National Gaming is 1.25 times less risky than Amazon. It trades about 0.05 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,614  in Amazon Inc on September 10, 2022 and sell it today you would earn a total of  295.00  from holding Amazon Inc or generate 3.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Penn National Gaming  vs.  Amazon Inc

 Performance (%) 
       Timeline  
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 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 and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Penn National and Amazon

The main advantage of trading using opposite Penn National and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
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The idea behind Penn National Gaming and Amazon Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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