Correlation Between Penn National and Sands China

Can any of the company-specific risk be diversified away by investing in both Penn National and Sands 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 National and Sands China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penn National Gaming and Sands China, you can compare the effects of market volatilities on Penn National and Sands 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 National with a short position of Sands China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Sands China.

Diversification Opportunities for Penn National and Sands China

0.17

Correlation Coefficient

Penn National  Sands China

Average diversification

The 3 months correlation between Penn and Sands is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Sands China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands China and Penn National 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 National Gaming are associated (or correlated) with Sands China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands China has no effect on the direction of Penn National i.e., Penn National and Sands China go up and down completely randomly.

Pair Corralation between Penn National and Sands China

Assuming the 90 days horizon Penn National Gaming is expected to generate 1.16 times more return on investment than Sands China. However, Penn National is 1.16 times more volatile than Sands China. It trades about -0.04 of its potential returns per unit of risk. Sands China is currently generating about -0.12 per unit of risk. If you would invest  1,775  in Penn National Gaming on December 28, 2024 and sell it today you would lose (175.00) from holding Penn National Gaming or give up 9.86% of portfolio value over 90 days.

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

Penn National Gaming  vs.  Sands China

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sands China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sands China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Penn National and Sands China

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

The idea behind Penn National Gaming and Sands China 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.