Correlation Between Penn National and Manali Petrochemicals

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

Diversification Opportunities for Penn National and Manali Petrochemicals

-0.14

Correlation Coefficient

Penn National  Manali Petrochemicals

Good diversification

The 3 months correlation between Penn and Manali is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Manali Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manali Petrochemicals 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 Manali Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manali Petrochemicals has no effect on the direction of Penn National i.e., Penn National and Manali Petrochemicals go up and down completely randomly.

Pair Corralation between Penn National and Manali Petrochemicals

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Manali Petrochemicals. In addition to that, Penn National is 1.45 times more volatile than Manali Petrochemicals Limited. It trades about -0.01 of its total potential returns per unit of risk. Manali Petrochemicals Limited is currently generating about -0.01 per unit of volatility. If you would invest  6,342  in Manali Petrochemicals Limited on December 24, 2024 and sell it today you would lose (165.00) from holding Manali Petrochemicals Limited or give up 2.6% of portfolio value over 90 days.

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

Penn National Gaming  vs.  Manali Petrochemicals Limited

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.

Manali Petrochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manali Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Manali Petrochemicals is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Penn National and Manali Petrochemicals

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

The idea behind Penn National Gaming and Manali Petrochemicals Limited 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.