Correlation Between PennantPark Investment and Check Point

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

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

Diversification Opportunities for PennantPark Investment and Check Point

-0.03

Correlation Coefficient

PennantPark Investment  Check Point

Good diversification

The 3 months correlation between PennantPark and Check is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Check Point go up and down completely randomly.

Pair Corralation between PennantPark Investment and Check Point

Assuming the 90 days horizon PennantPark Investment is expected to under-perform the Check Point. In addition to that, PennantPark Investment is 1.13 times more volatile than Check Point Software. It trades about -0.07 of its total potential returns per unit of risk. Check Point Software is currently generating about 0.21 per unit of volatility. If you would invest  16,575  in Check Point Software on September 21, 2024 and sell it today you would earn a total of  1,085  from holding Check Point Software or generate 6.55% return on investment over 90 days.

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

PennantPark Investment  vs.  Check Point Software

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.

Check Point Software

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PennantPark Investment and Check Point

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

The idea behind PennantPark Investment and Check Point Software 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.

Check out your portfolio center.

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.