Correlation Between PENN NATL and Zhongsheng Group

Can any of the company-specific risk be diversified away by investing in both PENN NATL and Zhongsheng Group 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 NATL and Zhongsheng Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PENN NATL GAMING and Zhongsheng Group Holdings, you can compare the effects of market volatilities on PENN NATL and Zhongsheng Group 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 NATL with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Zhongsheng Group.

Diversification Opportunities for PENN NATL and Zhongsheng Group

0.67

Correlation Coefficient

PENN NATL  Zhongsheng Group

Poor diversification

The 3 months correlation between PENN and Zhongsheng is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings and PENN NATL 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 NATL GAMING are associated (or correlated) with Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of PENN NATL i.e., PENN NATL and Zhongsheng Group go up and down completely randomly.

Pair Corralation between PENN NATL and Zhongsheng Group

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Zhongsheng Group. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 1.96 times less risky than Zhongsheng Group. The stock trades about -0.01 of its potential returns per unit of risk. The Zhongsheng Group Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Zhongsheng Group Holdings on September 22, 2024 and sell it today you would earn a total of  34.00  from holding Zhongsheng Group Holdings or generate 22.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

PENN NATL GAMING  vs.  Zhongsheng Group Holdings

PENN NATL GAMING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PENN NATL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Zhongsheng Group Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zhongsheng Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and Zhongsheng Group

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

The idea behind PENN NATL GAMING and Zhongsheng Group Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.