Correlation Between PENN NATL and TT Electronics

Can any of the company-specific risk be diversified away by investing in both PENN NATL and TT Electronics 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 NATL and TT Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PENN NATL GAMING and TT Electronics PLC, you can compare the effects of market volatilities on PENN NATL and TT Electronics 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 NATL with a short position of TT Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and TT Electronics.

Diversification Opportunities for PENN NATL and TT Electronics

-0.37

Correlation Coefficient

PENN NATL  TT Electronics

Very good diversification

The 3 months correlation between PENN and 7TT is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC and PENN NATL 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 NATL GAMING are associated (or correlated) with TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of PENN NATL i.e., PENN NATL and TT Electronics go up and down completely randomly.

Pair Corralation between PENN NATL and TT Electronics

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the TT Electronics. In addition to that, PENN NATL is 1.4 times more volatile than TT Electronics PLC. It trades about -0.19 of its total potential returns per unit of risk. TT Electronics PLC is currently generating about 0.42 per unit of volatility. If you would invest  169.00  in TT Electronics PLC on February 7, 2024 and sell it today you would earn a total of  33.00  from holding TT Electronics PLC or generate 19.53% return on investment over 90 days.

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

PENN NATL GAMING  vs.  TT Electronics PLC

PENN NATL GAMING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

TT Electronics PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TT Electronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and TT Electronics

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

The idea behind PENN NATL GAMING and TT Electronics PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.