Correlation Between PennantPark Investment and Veolia Environnement

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

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

Diversification Opportunities for PennantPark Investment and Veolia Environnement

-0.52

Correlation Coefficient

PennantPark Investment  Veolia Environnement

Excellent diversification

The 3 months correlation between PennantPark and Veolia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Veolia Environnement go up and down completely randomly.

Pair Corralation between PennantPark Investment and Veolia Environnement

Assuming the 90 days horizon PennantPark Investment is expected to generate 8.15 times less return on investment than Veolia Environnement. In addition to that, PennantPark Investment is 1.68 times more volatile than Veolia Environnement SA. It trades about 0.02 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.25 per unit of volatility. If you would invest  2,695  in Veolia Environnement SA on December 27, 2024 and sell it today you would earn a total of  486.00  from holding Veolia Environnement SA or generate 18.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

PennantPark Investment  vs.  Veolia Environnement SA

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Veolia Environnement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Veolia Environnement unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Investment and Veolia Environnement

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

The idea behind PennantPark Investment and Veolia Environnement SA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.