Correlation Between Penn National and Reliance Chemotex

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

Diversification Opportunities for Penn National and Reliance Chemotex

0.2

Correlation Coefficient

Penn National  Reliance Chemotex

Modest diversification

The 3 months correlation between Penn and Reliance is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Reliance Chemotex Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Chemotex 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 Reliance Chemotex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Chemotex has no effect on the direction of Penn National i.e., Penn National and Reliance Chemotex go up and down completely randomly.

Pair Corralation between Penn National and Reliance Chemotex

Given the investment horizon of 90 days Penn National Gaming is expected to generate 2.43 times more return on investment than Reliance Chemotex. However, Penn National is 2.43 times more volatile than Reliance Chemotex Industries. It trades about 0.19 of its potential returns per unit of risk. Reliance Chemotex Industries is currently generating about -0.15 per unit of risk. If you would invest  1,813  in Penn National Gaming on October 23, 2024 and sell it today you would earn a total of  189.00  from holding Penn National Gaming or generate 10.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Penn National Gaming  vs.  Reliance Chemotex Industries

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.

Reliance Chemotex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Chemotex Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Reliance Chemotex is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Penn National and Reliance Chemotex

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

The idea behind Penn National Gaming and Reliance Chemotex Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.