Correlation Between PennantPark Investment and WESTERN DIGITAL

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

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

Diversification Opportunities for PennantPark Investment and WESTERN DIGITAL

-0.04

Correlation Coefficient

PennantPark Investment  WESTERN DIGITAL

Good diversification

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

Pair Corralation between PennantPark Investment and WESTERN DIGITAL

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.82 times more return on investment than WESTERN DIGITAL. However, PennantPark Investment is 1.22 times less risky than WESTERN DIGITAL. It trades about 0.34 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about -0.32 per unit of risk. If you would invest  636.00  in PennantPark Investment on October 8, 2024 and sell it today you would earn a total of  65.00  from holding PennantPark Investment or generate 10.22% 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.  WESTERN DIGITAL

PennantPark Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennantPark Investment reported solid returns over the last few months and may actually be approaching a breakup point.

WESTERN DIGITAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN DIGITAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, WESTERN DIGITAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PennantPark Investment and WESTERN DIGITAL

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

The idea behind PennantPark Investment and WESTERN DIGITAL 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.