Correlation Between PENN NATL and Citic Telecom

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

Diversification Opportunities for PENN NATL and Citic Telecom

0.25

Correlation Coefficient

PENN NATL  Citic Telecom

Modest diversification

The 3 months correlation between PENN and Citic is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern 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 Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of PENN NATL i.e., PENN NATL and Citic Telecom go up and down completely randomly.

Pair Corralation between PENN NATL and Citic Telecom

Assuming the 90 days trading horizon PENN NATL is expected to generate 1.06 times less return on investment than Citic Telecom. In addition to that, PENN NATL is 1.23 times more volatile than Citic Telecom International. It trades about 0.06 of its total potential returns per unit of risk. Citic Telecom International is currently generating about 0.08 per unit of volatility. If you would invest  24.00  in Citic Telecom International on October 22, 2024 and sell it today you would earn a total of  3.00  from holding Citic Telecom International or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PENN NATL GAMING  vs.  Citic Telecom International

PENN NATL GAMING

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Citic Telecom Intern

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Telecom International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Citic Telecom is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PENN NATL and Citic Telecom

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

The idea behind PENN NATL GAMING and Citic Telecom International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.