Correlation Between MTI INVESTMENT and PennantPark Investment

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

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

Diversification Opportunities for MTI INVESTMENT and PennantPark Investment

0.02

Correlation Coefficient

MTI INVESTMENT  PennantPark Investment

Significant diversification

The 3 months correlation between MTI and PennantPark is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MTI INVESTMENT SE and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and MTI 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 MTI INVESTMENT SE 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 MTI INVESTMENT i.e., MTI INVESTMENT and PennantPark Investment go up and down completely randomly.

Pair Corralation between MTI INVESTMENT and PennantPark Investment

Assuming the 90 days horizon MTI INVESTMENT SE is expected to under-perform the PennantPark Investment. In addition to that, MTI INVESTMENT is 2.54 times more volatile than PennantPark Investment. It trades about -0.07 of its total potential returns per unit of risk. PennantPark Investment is currently generating about 0.01 per unit of volatility. If you would invest  639.00  in PennantPark Investment on December 21, 2024 and sell it today you would lose (2.00) from holding PennantPark Investment or give up 0.31% of portfolio value over 90 days.

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

MTI INVESTMENT SE  vs.  PennantPark Investment

MTI INVESTMENT SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTI INVESTMENT SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PennantPark Investment

Risk-Adjusted Performance

Weak

Over the last 90 days PennantPark Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with MTI INVESTMENT and PennantPark Investment

The main advantage of trading using opposite MTI INVESTMENT and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI INVESTMENT 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 MTI INVESTMENT SE 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.