Correlation Between PennantPark Investment and Initio

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

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

Diversification Opportunities for PennantPark Investment and Initio

-0.7

Correlation Coefficient

PennantPark Investment  Initio

Excellent diversification

The 3 months correlation between PennantPark and Initio is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Initio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Initio Inc 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 Initio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Initio Inc has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Initio go up and down completely randomly.

Pair Corralation between PennantPark Investment and Initio

Given the investment horizon of 90 days PennantPark Investment is expected to generate 0.29 times more return on investment than Initio. However, PennantPark Investment is 3.46 times less risky than Initio. It trades about 0.09 of its potential returns per unit of risk. Initio Inc is currently generating about -0.17 per unit of risk. If you would invest  669.00  in PennantPark Investment on December 21, 2024 and sell it today you would earn a total of  41.00  from holding PennantPark Investment or generate 6.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

PennantPark Investment  vs.  Initio Inc

PennantPark Investment

Risk-Adjusted Performance

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 weak basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Initio Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Initio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with PennantPark Investment and Initio

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

The idea behind PennantPark Investment and Initio Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.