Correlation Between PennantPark Investment and Cheniere Energy

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

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

Diversification Opportunities for PennantPark Investment and Cheniere Energy

0.72

Correlation Coefficient

PennantPark Investment  Cheniere Energy

Poor diversification

The 3 months correlation between PennantPark and Cheniere is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Cheniere Energy go up and down completely randomly.

Pair Corralation between PennantPark Investment and Cheniere Energy

Assuming the 90 days horizon PennantPark Investment is expected to generate 12.18 times less return on investment than Cheniere Energy. But when comparing it to its historical volatility, PennantPark Investment is 1.07 times less risky than Cheniere Energy. It trades about 0.01 of its potential returns per unit of risk. Cheniere Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,740  in Cheniere Energy on October 4, 2024 and sell it today you would earn a total of  4,330  from holding Cheniere Energy or generate 27.51% 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.  Cheniere Energy

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 February 2025.

Cheniere Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Investment and Cheniere Energy

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

The idea behind PennantPark Investment and Cheniere Energy 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.