Correlation Between PennantPark Investment and ELEMENT FLEET

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

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

Diversification Opportunities for PennantPark Investment and ELEMENT FLEET

0.69

Correlation Coefficient

PennantPark Investment  ELEMENT FLEET

Poor diversification

The 3 months correlation between PennantPark and ELEMENT is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and ELEMENT FLEET MGMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELEMENT FLEET MGMT 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 ELEMENT FLEET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELEMENT FLEET MGMT has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and ELEMENT FLEET go up and down completely randomly.

Pair Corralation between PennantPark Investment and ELEMENT FLEET

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.83 times more return on investment than ELEMENT FLEET. However, PennantPark Investment is 1.2 times less risky than ELEMENT FLEET. It trades about 0.06 of its potential returns per unit of risk. ELEMENT FLEET MGMT is currently generating about 0.04 per unit of risk. If you would invest  610.00  in PennantPark Investment on September 12, 2024 and sell it today you would earn a total of  34.00  from holding PennantPark Investment or generate 5.57% 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.  ELEMENT FLEET MGMT

PennantPark Investment

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ELEMENT FLEET MGMT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ELEMENT FLEET MGMT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ELEMENT FLEET is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennantPark Investment and ELEMENT FLEET

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

The idea behind PennantPark Investment and ELEMENT FLEET MGMT 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.