Correlation Between PennantPark Investment and Vulcan Materials

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

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

Diversification Opportunities for PennantPark Investment and Vulcan Materials

-0.04

Correlation Coefficient

PennantPark Investment  Vulcan Materials

Good diversification

The 3 months correlation between PennantPark and Vulcan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Vulcan Materials go up and down completely randomly.

Pair Corralation between PennantPark Investment and Vulcan Materials

Assuming the 90 days horizon PennantPark Investment is expected to generate 1.54 times less return on investment than Vulcan Materials. In addition to that, PennantPark Investment is 1.08 times more volatile than Vulcan Materials. It trades about 0.06 of its total potential returns per unit of risk. Vulcan Materials is currently generating about 0.09 per unit of volatility. If you would invest  23,756  in Vulcan Materials on October 26, 2024 and sell it today you would earn a total of  2,444  from holding Vulcan Materials or generate 10.29% 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.  Vulcan Materials

PennantPark Investment

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 4 (%) 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 February 2025.

Vulcan Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PennantPark Investment and Vulcan Materials

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

The idea behind PennantPark Investment and Vulcan Materials 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.