Correlation Between Penn National and PT Bank

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

Diversification Opportunities for Penn National and PT Bank

-0.54

Correlation Coefficient

Penn National  PT Bank

Excellent diversification

The 3 months correlation between Penn and PQ9 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Mandiri has no effect on the direction of Penn National i.e., Penn National and PT Bank go up and down completely randomly.

Pair Corralation between Penn National and PT Bank

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the PT Bank. But the stock apears to be less risky and, when comparing its historical volatility, Penn National Gaming is 1.4 times less risky than PT Bank. The stock trades about -0.01 of its potential returns per unit of risk. The PT Bank Mandiri is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  27.00  in PT Bank Mandiri on October 4, 2024 and sell it today you would earn a total of  9.00  from holding PT Bank Mandiri or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Penn National Gaming  vs.  PT Bank Mandiri

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.

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penn National and PT Bank

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

The idea behind Penn National Gaming and PT Bank Mandiri 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.