Correlation Between Penn National and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both Penn National and INDOFOOD AGRI 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 INDOFOOD AGRI 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 INDOFOOD AGRI RES, you can compare the effects of market volatilities on Penn National and INDOFOOD AGRI 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 INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and INDOFOOD AGRI.
Diversification Opportunities for Penn National and INDOFOOD AGRI
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Penn and INDOFOOD is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES 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 INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of Penn National i.e., Penn National and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between Penn National and INDOFOOD AGRI
Assuming the 90 days horizon Penn National Gaming is expected to generate 2.69 times more return on investment than INDOFOOD AGRI. However, Penn National is 2.69 times more volatile than INDOFOOD AGRI RES. It trades about 0.02 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about -0.21 per unit of risk. If you would invest 1,896 in Penn National Gaming on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Penn National Gaming or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penn National Gaming vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| Penn National Gaming |
| INDOFOOD AGRI RES |
Penn National and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penn National and INDOFOOD AGRI
The main advantage of trading using opposite Penn National and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National position performs unexpectedly, INDOFOOD AGRI 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 INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI'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 |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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