Correlation Between Vulcan Materials and PennantPark Investment

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

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

Diversification Opportunities for Vulcan Materials and PennantPark Investment

0.41

Correlation Coefficient

Vulcan Materials  PennantPark Investment

Very weak diversification

The 3 months correlation between Vulcan and PennantPark is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and PennantPark Investment go up and down completely randomly.

Pair Corralation between Vulcan Materials and PennantPark Investment

Assuming the 90 days horizon Vulcan Materials is expected to under-perform the PennantPark Investment. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.08 times less risky than PennantPark Investment. The stock trades about -0.12 of its potential returns per unit of risk. The PennantPark Investment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  639.00  in PennantPark Investment on December 22, 2024 and sell it today you would earn a total of  6.00  from holding PennantPark Investment or generate 0.94% return on investment over 90 days.

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

Vulcan Materials  vs.  PennantPark Investment

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PennantPark Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vulcan Materials and PennantPark Investment

The main advantage of trading using opposite Vulcan Materials and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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 CEOs Directory module to screen CEOs from public companies around the world.