Correlation Between PENN NATL and Sanyo Chemical

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

Diversification Opportunities for PENN NATL and Sanyo Chemical

-0.69

Correlation Coefficient

PENN NATL  Sanyo Chemical

Excellent diversification

The 3 months correlation between PENN and Sanyo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of PENN NATL i.e., PENN NATL and Sanyo Chemical go up and down completely randomly.

Pair Corralation between PENN NATL and Sanyo Chemical

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 2.32 times more return on investment than Sanyo Chemical. However, PENN NATL is 2.32 times more volatile than Sanyo Chemical Industries. It trades about 0.12 of its potential returns per unit of risk. Sanyo Chemical Industries is currently generating about -0.01 per unit of risk. If you would invest  1,670  in PENN NATL GAMING on September 3, 2024 and sell it today you would earn a total of  313.00  from holding PENN NATL GAMING or generate 18.74% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Sanyo Chemical Industries

PENN NATL GAMING

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sanyo Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PENN NATL and Sanyo Chemical

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

The idea behind PENN NATL GAMING and Sanyo Chemical Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.