Correlation Between PENN Entertainment and China Water
Can any of the company-specific risk be diversified away by investing in both PENN Entertainment and China Water 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 China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN Entertainment and China Water Affairs, you can compare the effects of market volatilities on PENN Entertainment and China Water 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 China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN Entertainment and China Water.
Diversification Opportunities for PENN Entertainment and China Water
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PENN and China is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs 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 China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of PENN Entertainment i.e., PENN Entertainment and China Water go up and down completely randomly.
Pair Corralation between PENN Entertainment and China Water
Assuming the 90 days trading horizon PENN Entertainment is expected to under-perform the China Water. But the stock apears to be less risky and, when comparing its historical volatility, PENN Entertainment is 1.3 times less risky than China Water. The stock trades about -0.01 of its potential returns per unit of risk. The China Water Affairs is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 20.00 in China Water Affairs on October 25, 2024 and sell it today you would earn a total of 36.00 from holding China Water Affairs or generate 180.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PENN Entertainment vs. China Water Affairs
Performance |
| Timeline |
| PENN Entertainment |
| China Water Affairs |
PENN Entertainment and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN Entertainment and China Water
The main advantage of trading using opposite PENN Entertainment and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN Entertainment position performs unexpectedly, China Water 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 China Water will offset losses from the drop in China Water's long position.| PENN Entertainment vs. Apple Inc | PENN Entertainment vs. Apple Inc | PENN Entertainment vs. Apple Inc | PENN Entertainment vs. Apple Inc |
| China Water vs. Scientific Games | China Water vs. Martin Marietta Materials | China Water vs. Materialise NV | China Water vs. GAMING FAC SA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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