Correlation Between Penn National and Limin Chemical

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

Diversification Opportunities for Penn National and Limin Chemical

-0.44

Correlation Coefficient

Penn National  Limin Chemical

Very good diversification

The 3 months correlation between Penn and Limin is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Limin Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limin Chemical 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 Limin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limin Chemical has no effect on the direction of Penn National i.e., Penn National and Limin Chemical go up and down completely randomly.

Pair Corralation between Penn National and Limin Chemical

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Limin Chemical. In addition to that, Penn National is 1.3 times more volatile than Limin Chemical Co. It trades about -0.01 of its total potential returns per unit of risk. Limin Chemical Co is currently generating about 0.17 per unit of volatility. If you would invest  790.00  in Limin Chemical Co on December 22, 2024 and sell it today you would earn a total of  193.00  from holding Limin Chemical Co or generate 24.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Penn National Gaming  vs.  Limin Chemical Co

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Penn National is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Limin Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Limin Chemical Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Limin Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Limin Chemical

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

The idea behind Penn National Gaming and Limin Chemical Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.