Correlation Between PennantPark Investment and Kinetik Holdings

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

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

Diversification Opportunities for PennantPark Investment and Kinetik Holdings

0.52

Correlation Coefficient

PennantPark Investment  Kinetik Holdings

Very weak diversification

The 3 months correlation between PennantPark and Kinetik is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Kinetik Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetik Holdings 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 Kinetik Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetik Holdings has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Kinetik Holdings go up and down completely randomly.

Pair Corralation between PennantPark Investment and Kinetik Holdings

Given the investment horizon of 90 days PennantPark Investment is expected to generate 2.21 times less return on investment than Kinetik Holdings. But when comparing it to its historical volatility, PennantPark Investment is 1.41 times less risky than Kinetik Holdings. It trades about 0.07 of its potential returns per unit of risk. Kinetik Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,642  in Kinetik Holdings on October 22, 2024 and sell it today you would earn a total of  3,875  from holding Kinetik Holdings or generate 146.67% 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.  Kinetik Holdings

PennantPark Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennantPark Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Kinetik Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Investment and Kinetik Holdings

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

The idea behind PennantPark Investment and Kinetik Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.