Correlation Between Penn National and Unicharm

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

Diversification Opportunities for Penn National and Unicharm

0.03

Correlation Coefficient

Penn National  Unicharm

Significant diversification

The 3 months correlation between Penn and Unicharm is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Unicharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unicharm 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 Unicharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unicharm has no effect on the direction of Penn National i.e., Penn National and Unicharm go up and down completely randomly.

Pair Corralation between Penn National and Unicharm

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.23 times more return on investment than Unicharm. However, Penn National is 1.23 times more volatile than Unicharm. It trades about 0.19 of its potential returns per unit of risk. Unicharm is currently generating about -0.19 per unit of risk. If you would invest  1,813  in Penn National Gaming on October 22, 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	Insignificant
Accuracy	84.21%
Values	Daily Returns

Penn National Gaming  vs.  Unicharm

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.

Unicharm

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Penn National and Unicharm

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

The idea behind Penn National Gaming and Unicharm 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.