Correlation Between Penn National and Zhongsheng Group

Can any of the company-specific risk be diversified away by investing in both Penn National and Zhongsheng 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 National and Zhongsheng Group 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 Zhongsheng Group Holdings, you can compare the effects of market volatilities on Penn National and Zhongsheng 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 National with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Zhongsheng Group.

Diversification Opportunities for Penn National and Zhongsheng Group

0.7

Correlation Coefficient

Penn National  Zhongsheng Group

Poor diversification

The 3 months correlation between Penn and Zhongsheng is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings 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 Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of Penn National i.e., Penn National and Zhongsheng Group go up and down completely randomly.

Pair Corralation between Penn National and Zhongsheng Group

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Zhongsheng Group. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.93 times less risky than Zhongsheng Group. The stock trades about 0.0 of its potential returns per unit of risk. The Zhongsheng Group Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  152.00  in Zhongsheng Group Holdings on October 4, 2024 and sell it today you would earn a total of  21.00  from holding Zhongsheng Group Holdings or generate 13.82% return on investment over 90 days.

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

Penn National Gaming  vs.  Zhongsheng Group Holdings

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhongsheng Group Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penn National and Zhongsheng Group

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

The idea behind Penn National Gaming and Zhongsheng Group Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.