Correlation Between Penn National and Inner Mongolia

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

Diversification Opportunities for Penn National and Inner Mongolia

0.19

Correlation Coefficient

Penn National  Inner Mongolia

Average diversification

The 3 months correlation between Penn and Inner is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Inner Mongolia Junzheng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Junzheng 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Junzheng has no effect on the direction of Penn National i.e., Penn National and Inner Mongolia go up and down completely randomly.

Pair Corralation between Penn National and Inner Mongolia

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Inner Mongolia. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.64 times less risky than Inner Mongolia. The stock trades about -0.14 of its potential returns per unit of risk. The Inner Mongolia Junzheng is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  563.00  in Inner Mongolia Junzheng on October 7, 2024 and sell it today you would lose (60.00) from holding Inner Mongolia Junzheng or give up 10.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Penn National Gaming  vs.  Inner Mongolia Junzheng

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Inner Mongolia Junzheng

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inner Mongolia Junzheng are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inner Mongolia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Inner Mongolia

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

The idea behind Penn National Gaming and Inner Mongolia Junzheng 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.