Correlation Between US Physical and PennantPark Investment

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

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

Diversification Opportunities for US Physical and PennantPark Investment

0.65

Correlation Coefficient

US Physical  PennantPark Investment

Poor diversification

The 3 months correlation between UPH and PennantPark is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding US Physical Therapy and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and US Physical 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 US Physical Therapy 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 US Physical i.e., US Physical and PennantPark Investment go up and down completely randomly.

Pair Corralation between US Physical and PennantPark Investment

Assuming the 90 days horizon US Physical Therapy is expected to generate 1.36 times more return on investment than PennantPark Investment. However, US Physical is 1.36 times more volatile than PennantPark Investment. It trades about 0.14 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.14 per unit of risk. If you would invest  7,014  in US Physical Therapy on October 8, 2024 and sell it today you would earn a total of  1,536  from holding US Physical Therapy or generate 21.9% return on investment over 90 days.

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

US Physical Therapy  vs.  PennantPark Investment

US Physical Therapy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Physical Therapy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Physical reported solid returns over the last few months and may actually be approaching a breakup point.

PennantPark Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PennantPark Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Physical and PennantPark Investment

The main advantage of trading using opposite US Physical and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Physical 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 US Physical Therapy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.