Correlation Between Penn National and Super Micro

Can any of the company-specific risk be diversified away by investing in both Penn National and Super Micro 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 Super Micro 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 Super Micro Computer, you can compare the effects of market volatilities on Penn National and Super Micro 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 Super Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Super Micro.

Diversification Opportunities for Penn National and Super Micro

-0.77

Correlation Coefficient

Penn National  Super Micro

Pay attention - limited upside

The 3 months correlation between Penn and Super is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer 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 Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of Penn National i.e., Penn National and Super Micro go up and down completely randomly.

Pair Corralation between Penn National and Super Micro

Given the investment horizon of 90 days Penn National Gaming is expected to generate 0.42 times more return on investment than Super Micro. However, Penn National Gaming is 2.36 times less risky than Super Micro. It trades about 0.0 of its potential returns per unit of risk. Super Micro Computer is currently generating about -0.28 per unit of risk. If you would invest  1,703  in Penn National Gaming on January 23, 2024 and sell it today you would lose (10.00) from holding Penn National Gaming or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  Super Micro Computer

Penn National Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Super Micro Computer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Super Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Super Micro

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

The idea behind Penn National Gaming and Super Micro Computer 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.