Correlation Between PennantPark Investment and United Internet

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

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

Diversification Opportunities for PennantPark Investment and United Internet

-0.68

Correlation Coefficient

PennantPark Investment  United Internet

Excellent diversification

The 3 months correlation between PennantPark and United is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and United Internet go up and down completely randomly.

Pair Corralation between PennantPark Investment and United Internet

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.82 times more return on investment than United Internet. However, PennantPark Investment is 1.21 times less risky than United Internet. It trades about 0.06 of its potential returns per unit of risk. United Internet AG is currently generating about -0.01 per unit of risk. If you would invest  419.00  in PennantPark Investment on October 5, 2024 and sell it today you would earn a total of  244.00  from holding PennantPark Investment or generate 58.23% return on investment over 90 days.

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

PennantPark Investment  vs.  United Internet AG

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.

United Internet AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Internet AG 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 fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PennantPark Investment and United Internet

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

The idea behind PennantPark Investment and United Internet AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.