Correlation Between Northstar Clean and PennantPark Investment

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

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

Diversification Opportunities for Northstar Clean and PennantPark Investment

0.15

Correlation Coefficient

Northstar Clean  PennantPark Investment

Average diversification

The 3 months correlation between Northstar and PennantPark is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and Northstar Clean 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 Northstar Clean Technologies are associated (or correlated) with PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Northstar Clean i.e., Northstar Clean and PennantPark Investment go up and down completely randomly.

Pair Corralation between Northstar Clean and PennantPark Investment

Assuming the 90 days horizon Northstar Clean Technologies is expected to generate 4.46 times more return on investment than PennantPark Investment. However, Northstar Clean is 4.46 times more volatile than PennantPark Investment. It trades about 0.05 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.08 per unit of risk. If you would invest  13.00  in Northstar Clean Technologies on September 29, 2024 and sell it today you would earn a total of  14.00  from holding Northstar Clean Technologies or generate 107.69% return on investment over 90 days.

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

Northstar Clean Technologies  vs.  PennantPark Investment

Northstar Clean Tech

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

PennantPark Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 4 (%) 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.

Pair Trading with Northstar Clean and PennantPark Investment

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

The idea behind Northstar Clean Technologies and PennantPark 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.