Correlation Between Penn National and GungHo Online

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

Diversification Opportunities for Penn National and GungHo Online

0.52

Correlation Coefficient

Penn National  GungHo Online

Very weak diversification

The 3 months correlation between Penn and GungHo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert 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 GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of Penn National i.e., Penn National and GungHo Online go up and down completely randomly.

Pair Corralation between Penn National and GungHo Online

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the GungHo Online. In addition to that, Penn National is 1.26 times more volatile than GungHo Online Entertainment. It trades about -0.05 of its total potential returns per unit of risk. GungHo Online Entertainment is currently generating about -0.06 per unit of volatility. If you would invest  1,981  in GungHo Online Entertainment on December 19, 2024 and sell it today you would lose (201.00) from holding GungHo Online Entertainment or give up 10.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Penn National Gaming  vs.  GungHo Online Entertainment

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 fragile 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.

GungHo Online Entert

Risk-Adjusted Performance

Very Weak

Over the last 90 days GungHo Online Entertainment 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.

Pair Trading with Penn National and GungHo Online

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

The idea behind Penn National Gaming and GungHo Online Entertainment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.