Correlation Between Penn National and CN DATANG

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

Diversification Opportunities for Penn National and CN DATANG

-0.12

Correlation Coefficient

Penn National  CN DATANG

Good diversification

The 3 months correlation between Penn and DT7 is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and CN DATANG C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN DATANG C 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 CN DATANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN DATANG C has no effect on the direction of Penn National i.e., Penn National and CN DATANG go up and down completely randomly.

Pair Corralation between Penn National and CN DATANG

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the CN DATANG. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.16 times less risky than CN DATANG. The stock trades about -0.04 of its potential returns per unit of risk. The CN DATANG C is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25.00  in CN DATANG C on December 19, 2024 and sell it today you would earn a total of  0.00  from holding CN DATANG C or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  CN DATANG C

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

CN DATANG C

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CN DATANG C are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CN DATANG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Penn National and CN DATANG

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

The idea behind Penn National Gaming and CN DATANG C 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.