Correlation Between PetroChina Company and PENN NATL

Can any of the company-specific risk be diversified away by investing in both PetroChina Company and PENN NATL 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 PetroChina Company and PENN NATL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PetroChina Company Limited and PENN NATL GAMING, you can compare the effects of market volatilities on PetroChina Company and PENN NATL 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 PetroChina Company with a short position of PENN NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina Company and PENN NATL.

Diversification Opportunities for PetroChina Company and PENN NATL

-0.25

Correlation Coefficient

PetroChina Company  PENN NATL

Very good diversification

The 3 months correlation between PetroChina and PENN is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Company Limited and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING and PetroChina Company 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 PetroChina Company Limited are associated (or correlated) with PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of PetroChina Company i.e., PetroChina Company and PENN NATL go up and down completely randomly.

Pair Corralation between PetroChina Company and PENN NATL

Assuming the 90 days horizon PetroChina Company is expected to generate 2.05 times less return on investment than PENN NATL. But when comparing it to its historical volatility, PetroChina Company Limited is 1.6 times less risky than PENN NATL. It trades about 0.03 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,829  in PENN NATL GAMING on October 26, 2024 and sell it today you would earn a total of  97.00  from holding PENN NATL GAMING or generate 5.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

PetroChina Company Limited  vs.  PENN NATL GAMING

PetroChina Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Company Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PetroChina Company is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PENN NATL GAMING

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PetroChina Company and PENN NATL

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

The idea behind PetroChina Company Limited and PENN NATL 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.