Correlation Between Penn National and Fast Retailing

Can any of the company-specific risk be diversified away by investing in both Penn National and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on Penn National and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Fast Retailing.

Diversification Opportunities for Penn National and Fast Retailing

0.19

Correlation Coefficient

Penn National  Fast Retailing

Average diversification

The 3 months correlation between Penn and Fast is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Penn National i.e., Penn National and Fast Retailing go up and down completely randomly.

Pair Corralation between Penn National and Fast Retailing

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Fast Retailing. In addition to that, Penn National is 1.66 times more volatile than Fast Retailing Co. It trades about -0.25 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.04 per unit of volatility. If you would invest  33,080  in Fast Retailing Co on October 5, 2024 and sell it today you would earn a total of  340.00  from holding Fast Retailing Co or generate 1.03% return on investment over 90 days.

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

Penn National Gaming  vs.  Fast Retailing Co

Penn National Gaming

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fast Retailing

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Penn National and Fast Retailing

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

The idea behind Penn National Gaming and Fast Retailing Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.