Correlation Between Penn National and Asahi Songwon

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

Diversification Opportunities for Penn National and Asahi Songwon

-0.09

Correlation Coefficient

Penn National  Asahi Songwon

Good diversification

The 3 months correlation between Penn and Asahi is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Asahi Songwon Colors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Songwon Colors 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 Asahi Songwon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Songwon Colors has no effect on the direction of Penn National i.e., Penn National and Asahi Songwon go up and down completely randomly.

Pair Corralation between Penn National and Asahi Songwon

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Asahi Songwon. In addition to that, Penn National is 1.09 times more volatile than Asahi Songwon Colors. It trades about -0.01 of its total potential returns per unit of risk. Asahi Songwon Colors is currently generating about 0.05 per unit of volatility. If you would invest  18,740  in Asahi Songwon Colors on October 23, 2024 and sell it today you would earn a total of  13,090  from holding Asahi Songwon Colors or generate 69.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.46%
Values	Daily Returns

Penn National Gaming  vs.  Asahi Songwon Colors

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) 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.

Asahi Songwon Colors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asahi Songwon Colors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Penn National and Asahi Songwon

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

The idea behind Penn National Gaming and Asahi Songwon Colors 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.