Correlation Between PennantPark Investment and Scholastic

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

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

Diversification Opportunities for PennantPark Investment and Scholastic

-0.44

Correlation Coefficient

PennantPark Investment  Scholastic

Very good diversification

The 3 months correlation between PennantPark and Scholastic is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Scholastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholastic 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 Scholastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholastic has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Scholastic go up and down completely randomly.

Pair Corralation between PennantPark Investment and Scholastic

Given the investment horizon of 90 days PennantPark Investment is expected to under-perform the Scholastic. But the stock apears to be less risky and, when comparing its historical volatility, PennantPark Investment is 2.41 times less risky than Scholastic. The stock trades about -0.07 of its potential returns per unit of risk. The Scholastic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,617  in Scholastic on September 9, 2024 and sell it today you would earn a total of  40.00  from holding Scholastic or generate 1.53% return on investment over 90 days.

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

PennantPark Investment  vs.  Scholastic

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.

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PennantPark Investment and Scholastic

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

The idea behind PennantPark Investment and Scholastic 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.