Correlation Between PENN NATL and SalMar ASA

Can any of the company-specific risk be diversified away by investing in both PENN NATL and SalMar ASA 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 SalMar ASA 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 SalMar ASA, you can compare the effects of market volatilities on PENN NATL and SalMar ASA 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 SalMar ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and SalMar ASA.

Diversification Opportunities for PENN NATL and SalMar ASA

0.46

Correlation Coefficient

PENN NATL  SalMar ASA

Very weak diversification

The 3 months correlation between PENN and SalMar is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA 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 SalMar ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalMar ASA has no effect on the direction of PENN NATL i.e., PENN NATL and SalMar ASA go up and down completely randomly.

Pair Corralation between PENN NATL and SalMar ASA

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the SalMar ASA. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 1.45 times less risky than SalMar ASA. The stock trades about -0.01 of its potential returns per unit of risk. The SalMar ASA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,805  in SalMar ASA on September 23, 2024 and sell it today you would earn a total of  2,721  from holding SalMar ASA or generate 150.75% return on investment over 90 days.

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

PENN NATL GAMING  vs.  SalMar ASA

PENN NATL GAMING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PENN NATL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SalMar ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SalMar ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PENN NATL and SalMar ASA

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

The idea behind PENN NATL GAMING and SalMar ASA 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.