Correlation Between PennantPark Investment and MPH Health

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

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

Diversification Opportunities for PennantPark Investment and MPH Health

0.26

Correlation Coefficient

PennantPark Investment  MPH Health

Modest diversification

The 3 months correlation between PennantPark and MPH is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and MPH Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPH Health Care 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 MPH Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPH Health Care has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and MPH Health go up and down completely randomly.

Pair Corralation between PennantPark Investment and MPH Health

Assuming the 90 days horizon PennantPark Investment is expected to generate 1.34 times more return on investment than MPH Health. However, PennantPark Investment is 1.34 times more volatile than MPH Health Care. It trades about 0.02 of its potential returns per unit of risk. MPH Health Care is currently generating about 0.02 per unit of risk. If you would invest  639.00  in PennantPark Investment on December 23, 2024 and sell it today you would earn a total of  10.00  from holding PennantPark Investment or generate 1.56% return on investment over 90 days.

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

PennantPark Investment  vs.  MPH Health Care

PennantPark Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 1 (%) 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.

MPH Health Care

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MPH Health Care are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, MPH Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PennantPark Investment and MPH Health

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

The idea behind PennantPark Investment and MPH Health Care 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.