Correlation Between PennantPark Investment and DXC Technology

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

By analyzing existing cross correlation between PennantPark Investment and DXC Technology Co, you can compare the effects of market volatilities on PennantPark Investment and DXC Technology 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 DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and DXC Technology.

Diversification Opportunities for PennantPark Investment and DXC Technology

0.67

Correlation Coefficient

PennantPark Investment  DXC Technology

Poor diversification

The 3 months correlation between PennantPark and DXC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology 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 DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and DXC Technology go up and down completely randomly.

Pair Corralation between PennantPark Investment and DXC Technology

Assuming the 90 days horizon PennantPark Investment is expected to under-perform the DXC Technology. But the stock apears to be less risky and, when comparing its historical volatility, PennantPark Investment is 1.34 times less risky than DXC Technology. The stock trades about -0.07 of its potential returns per unit of risk. The DXC Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,979  in DXC Technology Co on September 21, 2024 and sell it today you would earn a total of  18.00  from holding DXC Technology Co or generate 0.91% return on investment over 90 days.

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

PennantPark Investment  vs.  DXC Technology Co

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.

DXC Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DXC Technology Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DXC Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennantPark Investment and DXC Technology

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

The idea behind PennantPark Investment and DXC Technology 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.