Correlation Between Penn National and Yokohama Rubber

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

Diversification Opportunities for Penn National and Yokohama Rubber

-0.37

Correlation Coefficient

Penn National  Yokohama Rubber

Very good diversification

The 3 months correlation between Penn and Yokohama is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Penn National i.e., Penn National and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Penn National and Yokohama Rubber

Assuming the 90 days horizon Penn National Gaming is expected to under-perform the Yokohama Rubber. In addition to that, Penn National is 2.51 times more volatile than The Yokohama Rubber. It trades about -0.12 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.22 per unit of volatility. If you would invest  1,870  in The Yokohama Rubber on September 25, 2024 and sell it today you would earn a total of  110.00  from holding The Yokohama Rubber or generate 5.88% return on investment over 90 days.

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

Penn National Gaming  vs.  The Yokohama Rubber

Penn National Gaming

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 3 (%) 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 January 2025.

Yokohama Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Penn National and Yokohama Rubber

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

The idea behind Penn National Gaming and The Yokohama Rubber 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.