Correlation Between Penn National and Cardinal Health

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

Diversification Opportunities for Penn National and Cardinal Health

0.61

Correlation Coefficient

Penn National  Cardinal Health

Poor diversification

The 3 months correlation between Penn and Cardinal is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Penn National i.e., Penn National and Cardinal Health go up and down completely randomly.

Pair Corralation between Penn National and Cardinal Health

Assuming the 90 days horizon Penn National Gaming is expected to generate 1.94 times more return on investment than Cardinal Health. However, Penn National is 1.94 times more volatile than Cardinal Health. It trades about 0.13 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.2 per unit of risk. If you would invest  1,260  in Penn National Gaming on April 22, 2025 and sell it today you would earn a total of  302.00  from holding Penn National Gaming or generate 23.97% return on investment over 90 days.

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

Penn National Gaming  vs.  Cardinal Health

Penn National Gaming

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Cardinal Health

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

The idea behind Penn National Gaming and Cardinal Health 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.