Correlation Between Oatly Group and PennantPark Investment

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

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

Diversification Opportunities for Oatly Group and PennantPark Investment

-0.46

Correlation Coefficient

Oatly Group  PennantPark Investment

Very good diversification

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

Pair Corralation between Oatly Group and PennantPark Investment

Given the investment horizon of 90 days Oatly Group AB is expected to generate 5.06 times more return on investment than PennantPark Investment. However, Oatly Group is 5.06 times more volatile than PennantPark Investment. It trades about 0.03 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.08 per unit of risk. If you would invest  67.00  in Oatly Group AB on October 5, 2024 and sell it today you would earn a total of  8.60  from holding Oatly Group AB or generate 12.84% return on investment over 90 days.

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

Oatly Group AB  vs.  PennantPark Investment

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Oatly Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PennantPark Investment

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Oatly Group and PennantPark Investment

The main advantage of trading using opposite Oatly Group and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group 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 Oatly Group AB 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.