Correlation Between PennantPark Investment and Nokia

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

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

Diversification Opportunities for PennantPark Investment and Nokia

-0.13

Correlation Coefficient

PennantPark Investment  Nokia

Good diversification

The 3 months correlation between PennantPark and Nokia is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia 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 Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Nokia go up and down completely randomly.

Pair Corralation between PennantPark Investment and Nokia

Assuming the 90 days horizon PennantPark Investment is expected to generate 1.29 times less return on investment than Nokia. In addition to that, PennantPark Investment is 1.22 times more volatile than Nokia. It trades about 0.23 of its total potential returns per unit of risk. Nokia is currently generating about 0.36 per unit of volatility. If you would invest  398.00  in Nokia on October 5, 2024 and sell it today you would earn a total of  32.00  from holding Nokia or generate 8.04% 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.  Nokia

PennantPark Investment

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days PennantPark Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nokia

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Nokia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Nokia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PennantPark Investment and Nokia

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

The idea behind PennantPark Investment and Nokia 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.