Correlation Between Penn National and HUTCHISON TELECOMM

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

Diversification Opportunities for Penn National and HUTCHISON TELECOMM

-0.31

Correlation Coefficient

Penn National  HUTCHISON TELECOMM

Very good diversification

The 3 months correlation between Penn and HUTCHISON is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and HUTCHISON TELECOMM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHISON TELECOMM 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 HUTCHISON TELECOMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHISON TELECOMM has no effect on the direction of Penn National i.e., Penn National and HUTCHISON TELECOMM go up and down completely randomly.

Pair Corralation between Penn National and HUTCHISON TELECOMM

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the HUTCHISON TELECOMM. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.61 times less risky than HUTCHISON TELECOMM. The stock trades about -0.01 of its potential returns per unit of risk. The HUTCHISON TELECOMM is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3.35  in HUTCHISON TELECOMM on October 24, 2024 and sell it today you would lose (2.00) from holding HUTCHISON TELECOMM or give up 59.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Penn National Gaming  vs.  HUTCHISON TELECOMM

Penn National Gaming

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

HUTCHISON TELECOMM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUTCHISON TELECOMM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HUTCHISON TELECOMM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Penn National and HUTCHISON TELECOMM

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

The idea behind Penn National Gaming and HUTCHISON TELECOMM 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.