Correlation Between PennantPark Investment and KAGA EL

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

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

Diversification Opportunities for PennantPark Investment and KAGA EL

-0.47

Correlation Coefficient

PennantPark Investment  KAGA EL

Very good diversification

The 3 months correlation between PennantPark and KAGA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and KAGA EL LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAGA EL LTD 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 KAGA EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAGA EL LTD has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and KAGA EL go up and down completely randomly.

Pair Corralation between PennantPark Investment and KAGA EL

Assuming the 90 days horizon PennantPark Investment is expected to generate 1.32 times more return on investment than KAGA EL. However, PennantPark Investment is 1.32 times more volatile than KAGA EL LTD. It trades about 0.07 of its potential returns per unit of risk. KAGA EL LTD is currently generating about 0.03 per unit of risk. If you would invest  610.00  in PennantPark Investment on September 15, 2024 and sell it today you would earn a total of  40.00  from holding PennantPark Investment or generate 6.56% return on investment over 90 days.

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

PennantPark Investment  vs.  KAGA EL LTD

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.

KAGA EL LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAGA EL LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KAGA EL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennantPark Investment and KAGA EL

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

The idea behind PennantPark Investment and KAGA EL LTD 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .