Correlation Between Penn National and Datang International
Can any of the company-specific risk be diversified away by investing in both Penn National and Datang International 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 Datang International 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 Datang International Power, you can compare the effects of market volatilities on Penn National and Datang International 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 Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Datang International.
Diversification Opportunities for Penn National and Datang International
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Penn and Datang is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of Penn National i.e., Penn National and Datang International go up and down completely randomly.
Pair Corralation between Penn National and Datang International
Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Datang International. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.01 times less risky than Datang International. The stock trades about -0.01 of its potential returns per unit of risk. The Datang International Power is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Datang International Power on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Datang International Power or generate 30.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. Datang International Power
Performance |
| Timeline |
| Penn National Gaming |
| Datang International |
Penn National and Datang International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and Datang International
The main advantage of trading using opposite Penn National and Datang International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, Datang International 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 Datang International will offset losses from the drop in Datang International's long position.| Penn National vs. Sands China | Penn National vs. Superior Plus Corp | Penn National vs. SIVERS SEMICONDUCTORS AB | Penn National vs. Norsk Hydro ASA |
| Datang International vs. DiamondRock Hospitality | Datang International vs. GALENA MINING LTD | Datang International vs. Jacquet Metal Service | Datang International vs. SERI INDUSTRIAL EO |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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