Correlation Between Penn Entertainment and Nike

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

Diversification Opportunities for Penn Entertainment and Nike

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Penn Entertainment and Nike is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Penn Entertainment and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Penn Entertainment i.e., Penn Entertainment and Nike go up and down completely randomly.

Pair Corralation between Penn Entertainment and Nike

Given the investment horizon of 90 days Penn Entertainment is expected to generate 1.16 times more return on investment than Nike. However, Penn Entertainment is 1.16 times more volatile than Nike Inc. It trades about -0.08 of its potential returns per unit of risk. Nike Inc is currently generating about -0.16 per unit of risk. If you would invest  3,605  in Penn Entertainment on July 7, 2022 and sell it today you would lose (465.00)  from holding Penn Entertainment or give up 12.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Penn Entertainment  vs.  Nike Inc

 Performance (%) 
       Timeline  
Penn Entertainment 
Penn Entertainment Performance
0 of 100
Over the last 90 days Penn Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Penn Entertainment is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Penn Entertainment Price Channel

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 and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Penn Entertainment and Nike

The main advantage of trading using opposite Penn Entertainment and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn Entertainment position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.
Penn Entertainment vs. Amazon Inc
The idea behind Penn Entertainment and Nike 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.
Nike 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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