Correlation Between PennantPark Investment and HITACHI CONSTRMACHADR/2

Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and HITACHI CONSTRMACHADR/2 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 HITACHI CONSTRMACHADR/2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PennantPark Investment and HITACHI STRMACHADR2, you can compare the effects of market volatilities on PennantPark Investment and HITACHI CONSTRMACHADR/2 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 HITACHI CONSTRMACHADR/2. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and HITACHI CONSTRMACHADR/2.

Diversification Opportunities for PennantPark Investment and HITACHI CONSTRMACHADR/2

-0.62

Correlation Coefficient

PennantPark Investment  HITACHI CONSTRMACHADR/2

Excellent diversification

The 3 months correlation between PennantPark and HITACHI is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and HITACHI STRMACHADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HITACHI CONSTRMACHADR/2 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 HITACHI CONSTRMACHADR/2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HITACHI CONSTRMACHADR/2 has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and HITACHI CONSTRMACHADR/2 go up and down completely randomly.

Pair Corralation between PennantPark Investment and HITACHI CONSTRMACHADR/2

Assuming the 90 days horizon PennantPark Investment is expected to generate 0.81 times more return on investment than HITACHI CONSTRMACHADR/2. However, PennantPark Investment is 1.23 times less risky than HITACHI CONSTRMACHADR/2. It trades about 0.06 of its potential returns per unit of risk. HITACHI STRMACHADR2 is currently generating about 0.02 per unit of risk. If you would invest  402.00  in PennantPark Investment on September 3, 2024 and sell it today you would earn a total of  230.00  from holding PennantPark Investment or generate 57.21% return on investment over 90 days.

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

PennantPark Investment  vs.  HITACHI STRMACHADR2

PennantPark Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

HITACHI CONSTRMACHADR/2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HITACHI STRMACHADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, HITACHI CONSTRMACHADR/2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PennantPark Investment and HITACHI CONSTRMACHADR/2

The main advantage of trading using opposite PennantPark Investment and HITACHI CONSTRMACHADR/2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, HITACHI CONSTRMACHADR/2 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 HITACHI CONSTRMACHADR/2 will offset losses from the drop in HITACHI CONSTRMACHADR/2's long position.

The idea behind PennantPark Investment and HITACHI STRMACHADR2 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.