Correlation Between PENN NATL and Tokyu Construction

Can any of the company-specific risk be diversified away by investing in both PENN NATL and Tokyu Construction 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 NATL and Tokyu Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PENN NATL GAMING and Tokyu Construction Co, you can compare the effects of market volatilities on PENN NATL and Tokyu Construction 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 NATL with a short position of Tokyu Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Tokyu Construction.

Diversification Opportunities for PENN NATL and Tokyu Construction

0.57

Correlation Coefficient

PENN NATL  Tokyu Construction

Very weak diversification

The 3 months correlation between PENN and Tokyu is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction and PENN NATL 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 NATL GAMING are associated (or correlated) with Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of PENN NATL i.e., PENN NATL and Tokyu Construction go up and down completely randomly.

Pair Corralation between PENN NATL and Tokyu Construction

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.63 times more return on investment than Tokyu Construction. However, PENN NATL is 1.63 times more volatile than Tokyu Construction Co. It trades about 0.25 of its potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.13 per unit of risk. If you would invest  1,353  in PENN NATL GAMING on April 8, 2025 and sell it today you would earn a total of  206.00  from holding PENN NATL GAMING or generate 15.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

PENN NATL GAMING  vs.  Tokyu Construction Co

PENN NATL GAMING

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tokyu Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokyu Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and Tokyu Construction

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

The idea behind PENN NATL GAMING and Tokyu Construction Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.