Correlation Between PennantPark Investment and Richardson Electronics
Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and Richardson Electronics 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 Richardson Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennantPark Investment and Richardson Electronics, you can compare the effects of market volatilities on PennantPark Investment and Richardson Electronics 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 Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and Richardson Electronics.
Diversification Opportunities for PennantPark Investment and Richardson Electronics
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PennantPark and Richardson is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics 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 Richardson Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richardson Electronics has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Richardson Electronics go up and down completely randomly.
Pair Corralation between PennantPark Investment and Richardson Electronics
Assuming the 90 days horizon PennantPark Investment is expected to generate 0.78 times more return on investment than Richardson Electronics. However, PennantPark Investment is 1.28 times less risky than Richardson Electronics. It trades about 0.0 of its potential returns per unit of risk. Richardson Electronics is currently generating about -0.08 per unit of risk. If you would invest 653.00 in PennantPark Investment on September 24, 2024 and sell it today you would lose (1.00) from holding PennantPark Investment or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennantPark Investment vs. Richardson Electronics
Performance |
| Timeline |
| PennantPark Investment |
| Richardson Electronics |
PennantPark Investment and Richardson Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Investment and Richardson Electronics
The main advantage of trading using opposite PennantPark Investment and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, Richardson Electronics 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 Richardson Electronics will offset losses from the drop in Richardson Electronics' long position.| PennantPark Investment vs. Blackstone Group | PennantPark Investment vs. The Bank of | PennantPark Investment vs. Ameriprise Financial | PennantPark Investment vs. State Street |
| Richardson Electronics vs. CarsalesCom | Richardson Electronics vs. ECHO INVESTMENT ZY | Richardson Electronics vs. PennantPark Investment | Richardson Electronics vs. Commercial Vehicle Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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