Correlation Between Penn National and Guotai Epoint

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

Diversification Opportunities for Penn National and Guotai Epoint

0.04

Correlation Coefficient

Penn National  Guotai Epoint

Significant diversification

The 3 months correlation between Penn and Guotai is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Guotai Epoint Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Epoint Software 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 Guotai Epoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Epoint Software has no effect on the direction of Penn National i.e., Penn National and Guotai Epoint go up and down completely randomly.

Pair Corralation between Penn National and Guotai Epoint

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.66 times more return on investment than Guotai Epoint. However, Penn National is 1.66 times more volatile than Guotai Epoint Software. It trades about -0.08 of its potential returns per unit of risk. Guotai Epoint Software is currently generating about -0.48 per unit of risk. If you would invest  1,986  in Penn National Gaming on October 8, 2024 and sell it today you would lose (110.00) from holding Penn National Gaming or give up 5.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Penn National Gaming  vs.  Guotai Epoint Software

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. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Penn National and Guotai Epoint

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

The idea behind Penn National Gaming and Guotai Epoint Software 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.