Correlation Between Penn National and Zoom Video

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

Diversification Opportunities for Penn National and Zoom Video

0.41

Correlation Coefficient

Penn National  Zoom Video

Very weak diversification

The 3 months correlation between Penn and Zoom is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications 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 Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of Penn National i.e., Penn National and Zoom Video go up and down completely randomly.

Pair Corralation between Penn National and Zoom Video

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.76 times more return on investment than Zoom Video. However, Penn National is 1.76 times more volatile than Zoom Video Communications. It trades about 0.02 of its potential returns per unit of risk. Zoom Video Communications is currently generating about -0.24 per unit of risk. If you would invest  1,779  in Penn National Gaming on January 26, 2024 and sell it today you would earn a total of  5.00  from holding Penn National Gaming or generate 0.28% return on investment over 90 days.

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

Penn National Gaming  vs.  Zoom Video Communications

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.

Zoom Video Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoom Video Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Penn National and Zoom Video

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

The idea behind Penn National Gaming and Zoom Video Communications 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.