Correlation Between PennantPark Investment and Citizens Financial

Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and Citizens Financial 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 PennantPark Investment and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PennantPark Investment and Citizens Financial Group, you can compare the effects of market volatilities on PennantPark Investment and Citizens Financial 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 PennantPark Investment with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and Citizens Financial.

Diversification Opportunities for PennantPark Investment and Citizens Financial

0.79

Correlation Coefficient

PennantPark Investment  Citizens Financial

Poor diversification

The 3 months correlation between PennantPark and Citizens is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and PennantPark Investment 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 PennantPark Investment are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Citizens Financial go up and down completely randomly.

Pair Corralation between PennantPark Investment and Citizens Financial

Assuming the 90 days horizon PennantPark Investment is expected to generate 1.23 times more return on investment than Citizens Financial. However, PennantPark Investment is 1.23 times more volatile than Citizens Financial Group. It trades about -0.08 of its potential returns per unit of risk. Citizens Financial Group is currently generating about -0.21 per unit of risk. If you would invest  662.00  in PennantPark Investment on September 21, 2024 and sell it today you would lose (20.00) from holding PennantPark Investment or give up 3.02% of portfolio value over 90 days.

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

PennantPark Investment  vs.  Citizens Financial Group

PennantPark Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citizens Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Citizens Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennantPark Investment and Citizens Financial

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

The idea behind PennantPark Investment and Citizens Financial Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.