Correlation Between PENN NATL and TIMES CHINA

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

Diversification Opportunities for PENN NATL and TIMES CHINA

-0.26

Correlation Coefficient

PENN NATL  TIMES CHINA

Very good diversification

The 3 months correlation between PENN and TIMES is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and TIMES CHINA HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIMES CHINA HLDGS 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 TIMES CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIMES CHINA HLDGS has no effect on the direction of PENN NATL i.e., PENN NATL and TIMES CHINA go up and down completely randomly.

Pair Corralation between PENN NATL and TIMES CHINA

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the TIMES CHINA. But the stock apears to be less risky and, when comparing its historical volatility, PENN NATL GAMING is 4.91 times less risky than TIMES CHINA. The stock trades about -0.01 of its potential returns per unit of risk. The TIMES CHINA HLDGS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15.00  in TIMES CHINA HLDGS on October 21, 2024 and sell it today you would lose (12.05) from holding TIMES CHINA HLDGS or give up 80.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PENN NATL GAMING  vs.  TIMES CHINA HLDGS

PENN NATL GAMING

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

TIMES CHINA HLDGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TIMES CHINA HLDGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TIMES CHINA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PENN NATL and TIMES CHINA

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

The idea behind PENN NATL GAMING and TIMES CHINA HLDGS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.