Correlation Between PennantPark Investment and Walgreens Boots

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

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

Diversification Opportunities for PennantPark Investment and Walgreens Boots

0.35

Correlation Coefficient

PennantPark Investment  Walgreens Boots

Weak diversification

The 3 months correlation between PennantPark and Walgreens is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance 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 Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Walgreens Boots go up and down completely randomly.

Pair Corralation between PennantPark Investment and Walgreens Boots

Assuming the 90 days horizon PennantPark Investment is expected to generate 2.38 times less return on investment than Walgreens Boots. But when comparing it to its historical volatility, PennantPark Investment is 2.25 times less risky than Walgreens Boots. It trades about 0.07 of its potential returns per unit of risk. Walgreens Boots Alliance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  806.00  in Walgreens Boots Alliance on September 14, 2024 and sell it today you would earn a total of  118.00  from holding Walgreens Boots Alliance or generate 14.64% 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.  Walgreens Boots Alliance

PennantPark Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 5 (%) 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 January 2025.

Walgreens Boots Alliance

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Walgreens Boots Alliance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Walgreens Boots exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Investment and Walgreens Boots

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

The idea behind PennantPark Investment and Walgreens Boots Alliance 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.