Correlation Between BANK CIMB and PennantPark Investment

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

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

Diversification Opportunities for BANK CIMB and PennantPark Investment

0.07

Correlation Coefficient

BANK CIMB  PennantPark Investment

Significant diversification

The 3 months correlation between BANK and PennantPark is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BANK CIMB NIAGA and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and BANK CIMB 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 BANK CIMB NIAGA 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 BANK CIMB i.e., BANK CIMB and PennantPark Investment go up and down completely randomly.

Pair Corralation between BANK CIMB and PennantPark Investment

Assuming the 90 days trading horizon BANK CIMB NIAGA is expected to under-perform the PennantPark Investment. But the stock apears to be less risky and, when comparing its historical volatility, BANK CIMB NIAGA is 1.08 times less risky than PennantPark Investment. The stock trades about -0.11 of its potential returns per unit of risk. The PennantPark Investment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  639.00  in PennantPark Investment on December 22, 2024 and sell it today you would earn a total of  6.00  from holding PennantPark Investment or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

BANK CIMB NIAGA  vs.  PennantPark Investment

BANK CIMB NIAGA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PennantPark Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK CIMB and PennantPark Investment

The main advantage of trading using opposite BANK CIMB and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK CIMB 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 BANK CIMB NIAGA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.