Correlation Between PENN NATL and Nissan Chemical

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

Diversification Opportunities for PENN NATL and Nissan Chemical

0.39

Correlation Coefficient

PENN NATL  Nissan Chemical

Weak diversification

The 3 months correlation between PENN and Nissan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Nissan Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Corp 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 Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Corp has no effect on the direction of PENN NATL i.e., PENN NATL and Nissan Chemical go up and down completely randomly.

Pair Corralation between PENN NATL and Nissan Chemical

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 2.56 times more return on investment than Nissan Chemical. However, PENN NATL is 2.56 times more volatile than Nissan Chemical Corp. It trades about -0.1 of its potential returns per unit of risk. Nissan Chemical Corp is currently generating about -0.33 per unit of risk. If you would invest  2,036  in PENN NATL GAMING on October 5, 2024 and sell it today you would lose (140.00) from holding PENN NATL GAMING or give up 6.88% of portfolio value over 90 days.

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

PENN NATL GAMING  vs.  Nissan Chemical Corp

PENN NATL GAMING

Risk-Adjusted Performance

0 of 100

Modest

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 uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nissan Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nissan Chemical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PENN NATL and Nissan Chemical

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

The idea behind PENN NATL GAMING and Nissan Chemical Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.