Correlation Between Penn National and Chengdu Xuguang

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

Diversification Opportunities for Penn National and Chengdu Xuguang

-0.18

Correlation Coefficient

Penn National  Chengdu Xuguang

Good diversification

The 3 months correlation between Penn and Chengdu is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Chengdu Xuguang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xuguang Elec 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 Chengdu Xuguang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xuguang Elec has no effect on the direction of Penn National i.e., Penn National and Chengdu Xuguang go up and down completely randomly.

Pair Corralation between Penn National and Chengdu Xuguang

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Chengdu Xuguang. In addition to that, Penn National is 1.17 times more volatile than Chengdu Xuguang Electronics. It trades about -0.01 of its total potential returns per unit of risk. Chengdu Xuguang Electronics is currently generating about 0.02 per unit of volatility. If you would invest  782.00  in Chengdu Xuguang Electronics on December 23, 2024 and sell it today you would earn a total of  4.00  from holding Chengdu Xuguang Electronics or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Penn National Gaming  vs.  Chengdu Xuguang Electronics

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.

Chengdu Xuguang Elec

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xuguang Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chengdu Xuguang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Penn National and Chengdu Xuguang

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

The idea behind Penn National Gaming and Chengdu Xuguang Electronics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.