Correlation Between PENN NATL and DBS GROUP

Can any of the company-specific risk be diversified away by investing in both PENN NATL and DBS 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 DBS 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 DBS GROUP ADR4, you can compare the effects of market volatilities on PENN NATL and DBS 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 DBS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and DBS GROUP.

Diversification Opportunities for PENN NATL and DBS GROUP

0.38

Correlation Coefficient

PENN NATL  DBS GROUP

Weak diversification

The 3 months correlation between PENN and DBS is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and DBS GROUP ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS GROUP ADR4 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 DBS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS GROUP ADR4 has no effect on the direction of PENN NATL i.e., PENN NATL and DBS GROUP go up and down completely randomly.

Pair Corralation between PENN NATL and DBS GROUP

Assuming the 90 days trading horizon PENN NATL is expected to generate 1.93 times less return on investment than DBS GROUP. In addition to that, PENN NATL is 2.18 times more volatile than DBS GROUP ADR4. It trades about 0.04 of its total potential returns per unit of risk. DBS GROUP ADR4 is currently generating about 0.19 per unit of volatility. If you would invest  10,654  in DBS GROUP ADR4 on October 26, 2024 and sell it today you would earn a total of  1,646  from holding DBS GROUP ADR4 or generate 15.45% 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.  DBS GROUP ADR4

PENN NATL GAMING

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DBS GROUP ADR4

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DBS GROUP ADR4 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DBS GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and DBS GROUP

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

The idea behind PENN NATL GAMING and DBS GROUP ADR4 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.