Correlation Between AUST AGRICULTURAL and Penn National

Can any of the company-specific risk be diversified away by investing in both AUST AGRICULTURAL and Penn National 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 AUST AGRICULTURAL and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUST AGRICULTURAL and Penn National Gaming, you can compare the effects of market volatilities on AUST AGRICULTURAL and Penn National 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 AUST AGRICULTURAL with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and Penn National.

Diversification Opportunities for AUST AGRICULTURAL and Penn National

-0.68

Correlation Coefficient

AUST AGRICULTURAL  Penn National

Excellent diversification

The 3 months correlation between AUST and Penn is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and AUST AGRICULTURAL 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 AUST AGRICULTURAL are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of AUST AGRICULTURAL i.e., AUST AGRICULTURAL and Penn National go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and Penn National

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to under-perform the Penn National. But the stock apears to be less risky and, when comparing its historical volatility, AUST AGRICULTURAL is 2.48 times less risky than Penn National. The stock trades about -0.03 of its potential returns per unit of risk. The Penn National Gaming is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,787  in Penn National Gaming on September 21, 2024 and sell it today you would earn a total of  35.00  from holding Penn National Gaming or generate 1.96% return on investment over 90 days.

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

AUST AGRICULTURAL  vs.  Penn National Gaming

AUST AGRICULTURAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUST AGRICULTURAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penn National is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AUST AGRICULTURAL and Penn National

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

The idea behind AUST AGRICULTURAL and Penn National Gaming 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.