Correlation Between PennantPark Investment and AURUBIS

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

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

Diversification Opportunities for PennantPark Investment and AURUBIS

-0.37

Correlation Coefficient

PennantPark Investment  AURUBIS

Very good diversification

The 3 months correlation between PennantPark and AURUBIS is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and AURUBIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS 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 AURUBIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and AURUBIS go up and down completely randomly.

Pair Corralation between PennantPark Investment and AURUBIS

Assuming the 90 days horizon PennantPark Investment is expected to generate 13.17 times less return on investment than AURUBIS. But when comparing it to its historical volatility, PennantPark Investment is 1.18 times less risky than AURUBIS. It trades about 0.01 of its potential returns per unit of risk. AURUBIS is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,695  in AURUBIS on December 24, 2024 and sell it today you would earn a total of  1,455  from holding AURUBIS or generate 18.91% 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.  AURUBIS

PennantPark Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AURUBIS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AURUBIS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Investment and AURUBIS

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

The idea behind PennantPark Investment and AURUBIS 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.