Correlation Between PennantPark Investment and AG Mortgage

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

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

Diversification Opportunities for PennantPark Investment and AG Mortgage

0.65

Correlation Coefficient

PennantPark Investment  AG Mortgage

Poor diversification

The 3 months correlation between PennantPark and MITN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and AG Mortgage go up and down completely randomly.

Pair Corralation between PennantPark Investment and AG Mortgage

Given the investment horizon of 90 days PennantPark Investment is expected to generate 4.79 times more return on investment than AG Mortgage. However, PennantPark Investment is 4.79 times more volatile than AG Mortgage Investment. It trades about 0.03 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.13 per unit of risk. If you would invest  679.00  in PennantPark Investment on October 26, 2024 and sell it today you would earn a total of  15.00  from holding PennantPark Investment or generate 2.21% return on investment over 90 days.

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

PennantPark Investment  vs.  AG Mortgage Investment

PennantPark Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 2 (%) 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.

AG Mortgage Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PennantPark Investment and AG Mortgage

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

The idea behind PennantPark Investment and AG Mortgage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.