Correlation Between Penn National and CHIBA BANK

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

Diversification Opportunities for Penn National and CHIBA BANK

0.65

Correlation Coefficient

Penn National  CHIBA BANK

Poor diversification

The 3 months correlation between Penn and CHIBA is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and CHIBA BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIBA BANK 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 CHIBA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIBA BANK has no effect on the direction of Penn National i.e., Penn National and CHIBA BANK go up and down completely randomly.

Pair Corralation between Penn National and CHIBA BANK

Assuming the 90 days horizon Penn National Gaming is expected to generate 1.43 times more return on investment than CHIBA BANK. However, Penn National is 1.43 times more volatile than CHIBA BANK. It trades about 0.04 of its potential returns per unit of risk. CHIBA BANK is currently generating about 0.03 per unit of risk. If you would invest  1,701  in Penn National Gaming on September 29, 2024 and sell it today you would earn a total of  80.00  from holding Penn National Gaming or generate 4.7% return on investment over 90 days.

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

Penn National Gaming  vs.  CHIBA BANK

Penn National Gaming

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CHIBA BANK

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHIBA BANK are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CHIBA BANK is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Penn National and CHIBA BANK

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

The idea behind Penn National Gaming and CHIBA BANK 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.