Correlation Between PennantPark Investment and Eureka Acquisition

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

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

Diversification Opportunities for PennantPark Investment and Eureka Acquisition

0.58

Correlation Coefficient

PennantPark Investment  Eureka Acquisition

Very weak diversification

The 3 months correlation between PennantPark and Eureka is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Eureka Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka Acquisition Corp and PennantPark 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 PennantPark Investment are associated (or correlated) with Eureka Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Acquisition Corp has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Eureka Acquisition go up and down completely randomly.

Pair Corralation between PennantPark Investment and Eureka Acquisition

Given the investment horizon of 90 days PennantPark Investment is expected to generate 23.01 times more return on investment than Eureka Acquisition. However, PennantPark Investment is 23.01 times more volatile than Eureka Acquisition Corp. It trades about 0.05 of its potential returns per unit of risk. Eureka Acquisition Corp is currently generating about 0.28 per unit of risk. If you would invest  675.00  in PennantPark Investment on October 25, 2024 and sell it today you would earn a total of  22.00  from holding PennantPark Investment or generate 3.26% return on investment over 90 days.

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

PennantPark Investment  vs.  Eureka Acquisition Corp

PennantPark Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 3 (%) 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.

Eureka Acquisition Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Acquisition Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Eureka Acquisition is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PennantPark Investment and Eureka Acquisition

The main advantage of trading using opposite PennantPark Investment and Eureka Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, Eureka Acquisition 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 Eureka Acquisition will offset losses from the drop in Eureka Acquisition's long position.

The idea behind PennantPark Investment and Eureka Acquisition Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.