Correlation Between PENN NATL and Orient Overseas
Can any of the company-specific risk be diversified away by investing in both PENN NATL and Orient Overseas 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 Orient Overseas 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 Orient Overseas Limited, you can compare the effects of market volatilities on PENN NATL and Orient Overseas 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 Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Orient Overseas.
Diversification Opportunities for PENN NATL and Orient Overseas
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PENN and Orient is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas 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 Orient Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Overseas has no effect on the direction of PENN NATL i.e., PENN NATL and Orient Overseas go up and down completely randomly.
Pair Corralation between PENN NATL and Orient Overseas
Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.11 times more return on investment than Orient Overseas. However, PENN NATL is 1.11 times more volatile than Orient Overseas Limited. It trades about 0.3 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about -0.19 per unit of risk. If you would invest 1,772 in PENN NATL GAMING on September 4, 2024 and sell it today you would earn a total of 267.00 from holding PENN NATL GAMING or generate 15.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN NATL GAMING vs. Orient Overseas Limited
Performance |
| Timeline |
| PENN NATL GAMING |
| Orient Overseas |
PENN NATL and Orient Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and Orient Overseas
The main advantage of trading using opposite PENN NATL and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL position performs unexpectedly, Orient Overseas 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 Orient Overseas will offset losses from the drop in Orient Overseas' long position.The idea behind PENN NATL GAMING and Orient Overseas Limited 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.| Orient Overseas vs. Consolidated Communications Holdings | Orient Overseas vs. Warner Music Group | Orient Overseas vs. LG Display Co | Orient Overseas vs. Charter Communications |
Check out your portfolio center.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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