Correlation Between LENSAR and PennantPark Investment

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

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

Diversification Opportunities for LENSAR and PennantPark Investment

0.46

Correlation Coefficient

LENSAR  PennantPark Investment

Very weak diversification

The 3 months correlation between LENSAR and PennantPark is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and PennantPark Investment go up and down completely randomly.

Pair Corralation between LENSAR and PennantPark Investment

Given the investment horizon of 90 days LENSAR Inc is expected to generate 4.78 times more return on investment than PennantPark Investment. However, LENSAR is 4.78 times more volatile than PennantPark Investment. It trades about 0.09 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.08 per unit of risk. If you would invest  299.00  in LENSAR Inc on September 26, 2024 and sell it today you would earn a total of  582.00  from holding LENSAR Inc or generate 194.65% return on investment over 90 days.

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

LENSAR Inc  vs.  PennantPark Investment

LENSAR Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, LENSAR reported 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 LENSAR and PennantPark Investment

The main advantage of trading using opposite LENSAR and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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 LENSAR Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.