Correlation Between PennantPark Investment and PT Bank

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

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

Diversification Opportunities for PennantPark Investment and PT Bank

0.25

Correlation Coefficient

PennantPark Investment  PT Bank

Modest diversification

The 3 months correlation between PennantPark and PQ9 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Mandiri has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and PT Bank go up and down completely randomly.

Pair Corralation between PennantPark Investment and PT Bank

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.27 times more return on investment than PT Bank. However, PennantPark Investment is 3.72 times less risky than PT Bank. It trades about 0.03 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about -0.04 per unit of risk. If you would invest  641.00  in PennantPark Investment on December 30, 2024 and sell it today you would earn a total of  19.00  from holding PennantPark Investment or generate 2.96% 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.  PT Bank Mandiri

PennantPark Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Bank Mandiri

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PennantPark Investment and PT Bank

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

The idea behind PennantPark Investment and PT Bank Mandiri 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.