Correlation Between GE Vernova and PennantPark Investment

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

By analyzing existing cross correlation between GE Vernova LLC and PennantPark Investment, you can compare the effects of market volatilities on GE Vernova and PennantPark Investment 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 GE Vernova with a short position of PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Vernova and PennantPark Investment.

Diversification Opportunities for GE Vernova and PennantPark Investment

0.4

Correlation Coefficient

GE Vernova  PennantPark Investment

Very weak diversification

The 3 months correlation between GEV and PennantPark is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and GE Vernova 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 GE Vernova LLC are associated (or correlated) with PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of GE Vernova i.e., GE Vernova and PennantPark Investment go up and down completely randomly.

Pair Corralation between GE Vernova and PennantPark Investment

Considering the 90-day investment horizon GE Vernova LLC is expected to generate 2.75 times more return on investment than PennantPark Investment. However, GE Vernova is 2.75 times more volatile than PennantPark Investment. It trades about 0.19 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.1 per unit of risk. If you would invest  26,234  in GE Vernova LLC on October 7, 2024 and sell it today you would earn a total of  9,169  from holding GE Vernova LLC or generate 34.95% return on investment over 90 days.

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

GE Vernova LLC  vs.  PennantPark Investment

GE Vernova LLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

PennantPark Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PennantPark Investment 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 GE Vernova and PennantPark Investment

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

The idea behind GE Vernova LLC and PennantPark Investment 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.