Correlation Between Sunny Optical and Penn National

Can any of the company-specific risk be diversified away by investing in both Sunny Optical and Penn National 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 Sunny Optical and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunny Optical Technology and Penn National Gaming, you can compare the effects of market volatilities on Sunny Optical and Penn National 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 Sunny Optical with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and Penn National.

Diversification Opportunities for Sunny Optical and Penn National

0.36

Correlation Coefficient

Sunny Optical  Penn National

Weak diversification

The 3 months correlation between Sunny and Penn is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and Sunny Optical 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 Sunny Optical Technology are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Sunny Optical i.e., Sunny Optical and Penn National go up and down completely randomly.

Pair Corralation between Sunny Optical and Penn National

Assuming the 90 days horizon Sunny Optical Technology is expected to generate 1.13 times more return on investment than Penn National. However, Sunny Optical is 1.13 times more volatile than Penn National Gaming. It trades about 0.2 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.06 per unit of risk. If you would invest  578.00  in Sunny Optical Technology on October 26, 2024 and sell it today you would earn a total of  265.00  from holding Sunny Optical Technology or generate 45.85% return on investment over 90 days.

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

Sunny Optical Technology  vs.  Penn National Gaming

Sunny Optical Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sunny Optical and Penn National

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

The idea behind Sunny Optical Technology and Penn National Gaming 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.