Correlation Between Haleon PLC and PennantPark Investment

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

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

Diversification Opportunities for Haleon PLC and PennantPark Investment

-0.4

Correlation Coefficient

Haleon PLC  PennantPark Investment

Very good diversification

The 3 months correlation between Haleon and PennantPark is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Haleon PLC and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and Haleon PLC 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 Haleon PLC 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 Haleon PLC i.e., Haleon PLC and PennantPark Investment go up and down completely randomly.

Pair Corralation between Haleon PLC and PennantPark Investment

Assuming the 90 days horizon Haleon PLC is expected to generate 1.06 times less return on investment than PennantPark Investment. In addition to that, Haleon PLC is 1.1 times more volatile than PennantPark Investment. It trades about 0.06 of its total potential returns per unit of risk. PennantPark Investment is currently generating about 0.07 per unit of volatility. If you would invest  514.00  in PennantPark Investment on October 3, 2024 and sell it today you would earn a total of  149.00  from holding PennantPark Investment or generate 28.99% return on investment over 90 days.

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

Haleon PLC  vs.  PennantPark Investment

Haleon PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haleon PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Haleon PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly fragile basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Haleon PLC and PennantPark Investment

The main advantage of trading using opposite Haleon PLC and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haleon PLC 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 Haleon PLC 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.