Correlation Between PennantPark Investment and Procter Gamble

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

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

Diversification Opportunities for PennantPark Investment and Procter Gamble

-0.09

Correlation Coefficient

PennantPark Investment  Procter Gamble

Good diversification

The 3 months correlation between PennantPark and Procter is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Procter Gamble go up and down completely randomly.

Pair Corralation between PennantPark Investment and Procter Gamble

Given the investment horizon of 90 days PennantPark Investment is expected to generate 1.32 times more return on investment than Procter Gamble. However, PennantPark Investment is 1.32 times more volatile than Procter Gamble. It trades about 0.07 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.04 per unit of risk. If you would invest  472.00  in PennantPark Investment on October 4, 2024 and sell it today you would earn a total of  236.00  from holding PennantPark Investment or generate 50.0% return on investment over 90 days.

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

PennantPark Investment  vs.  Procter Gamble

PennantPark Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 5 (%) 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.

Procter Gamble

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennantPark Investment and Procter Gamble

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

The idea behind PennantPark Investment and Procter Gamble 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .