Correlation Between PennantPark Investment and Expedia

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

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

Diversification Opportunities for PennantPark Investment and Expedia

0.25

Correlation Coefficient

PennantPark Investment  Expedia

Modest diversification

The 3 months correlation between PennantPark and Expedia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group 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 Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Expedia go up and down completely randomly.

Pair Corralation between PennantPark Investment and Expedia

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.6 times more return on investment than Expedia. However, PennantPark Investment is 1.68 times less risky than Expedia. It trades about 0.1 of its potential returns per unit of risk. Expedia Group is currently generating about 0.05 per unit of risk. If you would invest  616.00  in PennantPark Investment on December 2, 2024 and sell it today you would earn a total of  61.00  from holding PennantPark Investment or generate 9.9% 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.  Expedia Group

PennantPark Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Expedia Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Expedia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PennantPark Investment and Expedia

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

The idea behind PennantPark Investment and Expedia Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.