Correlation Between PennantPark Investment and SIMS METAL

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

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

Diversification Opportunities for PennantPark Investment and SIMS METAL

0.1

Correlation Coefficient

PennantPark Investment  SIMS METAL

Average diversification

The 3 months correlation between PennantPark and SIMS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT 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 SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and SIMS METAL go up and down completely randomly.

Pair Corralation between PennantPark Investment and SIMS METAL

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.92 times more return on investment than SIMS METAL. However, PennantPark Investment is 1.09 times less risky than SIMS METAL. It trades about 0.06 of its potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.0 per unit of risk. If you would invest  405.00  in PennantPark Investment on September 26, 2024 and sell it today you would earn a total of  255.00  from holding PennantPark Investment or generate 62.96% return on investment over 90 days.

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

PennantPark Investment  vs.  SIMS METAL MGT

PennantPark Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 8 (%) 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.

SIMS METAL MGT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMS METAL MGT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, SIMS METAL 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 SIMS METAL

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

The idea behind PennantPark Investment and SIMS METAL MGT 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.