Correlation Between Scholastic and PennantPark Investment

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

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

Diversification Opportunities for Scholastic and PennantPark Investment

-0.44

Correlation Coefficient

Scholastic  PennantPark Investment

Very good diversification

The 3 months correlation between Scholastic and PennantPark is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Scholastic and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and Scholastic 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 Scholastic 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 Scholastic i.e., Scholastic and PennantPark Investment go up and down completely randomly.

Pair Corralation between Scholastic and PennantPark Investment

Given the investment horizon of 90 days Scholastic is expected to generate 2.41 times more return on investment than PennantPark Investment. However, Scholastic is 2.41 times more volatile than PennantPark Investment. It trades about 0.04 of its potential returns per unit of risk. PennantPark Investment is currently generating about -0.07 per unit of risk. 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

Scholastic  vs.  PennantPark Investment

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.

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.

Pair Trading with Scholastic and PennantPark Investment

The main advantage of trading using opposite Scholastic and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scholastic 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 Scholastic 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.