Correlation Between PENN Entertainment, and American Airlines

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

By analyzing existing cross correlation between PENN Entertainment, and American Airlines Group, you can compare the effects of market volatilities on PENN Entertainment, and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN Entertainment, and American Airlines.

Diversification Opportunities for PENN Entertainment, and American Airlines

-0.58

Correlation Coefficient

PENN Entertainment,  American Airlines

Excellent diversification

The 3 months correlation between PENN and American is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of PENN Entertainment, i.e., PENN Entertainment, and American Airlines go up and down completely randomly.

Pair Corralation between PENN Entertainment, and American Airlines

Assuming the 90 days trading horizon PENN Entertainment, is expected to under-perform the American Airlines. In addition to that, PENN Entertainment, is 1.08 times more volatile than American Airlines Group. It trades about -0.07 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.14 per unit of volatility. If you would invest  5,428  in American Airlines Group on April 24, 2025 and sell it today you would earn a total of  1,572  from holding American Airlines Group or generate 28.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

PENN Entertainment,  vs.  American Airlines Group

PENN Entertainment,

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN Entertainment, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

American Airlines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, American Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN Entertainment, and American Airlines

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

The idea behind PENN Entertainment, and American Airlines Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.