Correlation Between PennantPark Investment and WisdomTree Investments
Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and WisdomTree Investments 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 WisdomTree Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennantPark Investment and WisdomTree Investments, you can compare the effects of market volatilities on PennantPark Investment and WisdomTree Investments 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 WisdomTree Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and WisdomTree Investments.
Diversification Opportunities for PennantPark Investment and WisdomTree Investments
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PennantPark and WisdomTree is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments 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 WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and WisdomTree Investments go up and down completely randomly.
Pair Corralation between PennantPark Investment and WisdomTree Investments
Assuming the 90 days horizon PennantPark Investment is expected to generate 1.69 times less return on investment than WisdomTree Investments. But when comparing it to its historical volatility, PennantPark Investment is 1.12 times less risky than WisdomTree Investments. It trades about 0.06 of its potential returns per unit of risk. WisdomTree Investments is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 501.00 in WisdomTree Investments on August 31, 2024 and sell it today you would earn a total of 632.00 from holding WisdomTree Investments or generate 126.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennantPark Investment vs. WisdomTree Investments
Performance |
| Timeline |
| PennantPark Investment |
| WisdomTree Investments |
PennantPark Investment and WisdomTree Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Investment and WisdomTree Investments
The main advantage of trading using opposite PennantPark Investment and WisdomTree Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, WisdomTree Investments 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 WisdomTree Investments will offset losses from the drop in WisdomTree Investments' long position.| PennantPark Investment vs. Ameriprise Financial | PennantPark Investment vs. Ares Management Corp | PennantPark Investment vs. Superior Plus Corp | PennantPark Investment vs. NMI Holdings |
| WisdomTree Investments vs. Ameriprise Financial | WisdomTree Investments vs. Ares Management Corp | WisdomTree Investments vs. Superior Plus Corp | WisdomTree Investments vs. NMI Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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