Correlation Between PennantPark Investment and NEXON

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

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

Diversification Opportunities for PennantPark Investment and NEXON

-0.76

Correlation Coefficient

PennantPark Investment  NEXON

Pay attention - limited upside

The 3 months correlation between PennantPark and NEXON is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON 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 NEXON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and NEXON go up and down completely randomly.

Pair Corralation between PennantPark Investment and NEXON

Assuming the 90 days horizon PennantPark Investment is expected to generate 3.85 times less return on investment than NEXON. In addition to that, PennantPark Investment is 1.25 times more volatile than NEXON Co. It trades about 0.05 of its total potential returns per unit of risk. NEXON Co is currently generating about 0.25 per unit of volatility. If you would invest  1,290  in NEXON Co on September 27, 2024 and sell it today you would earn a total of  90.00  from holding NEXON Co or generate 6.98% return on investment over 90 days.

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

PennantPark Investment  vs.  NEXON Co

PennantPark Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 8 (%) 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.

NEXON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXON Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PennantPark Investment and NEXON

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

The idea behind PennantPark Investment and NEXON 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.