Correlation Between PennantPark Investment and SLR Investment
Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and SLR 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 PennantPark Investment and SLR Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennantPark Investment and SLR Investment Corp, you can compare the effects of market volatilities on PennantPark Investment and SLR 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 PennantPark Investment with a short position of SLR Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and SLR Investment.
Diversification Opportunities for PennantPark Investment and SLR Investment
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PennantPark and SLR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and SLR Investment go up and down completely randomly.
Pair Corralation between PennantPark Investment and SLR Investment
Assuming the 90 days horizon PennantPark Investment is expected to generate 1.58 times more return on investment than SLR Investment. However, PennantPark Investment is 1.58 times more volatile than SLR Investment Corp. It trades about 0.06 of its potential returns per unit of risk. SLR Investment Corp is currently generating about 0.06 per unit of risk. If you would invest 411.00 in PennantPark Investment on August 29, 2024 and sell it today you would earn a total of 247.00 from holding PennantPark Investment or generate 60.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
PennantPark Investment vs. SLR Investment Corp
Performance |
| Timeline |
| PennantPark Investment |
| SLR Investment Corp |
PennantPark Investment and SLR Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Investment and SLR Investment
The main advantage of trading using opposite PennantPark Investment and SLR Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, SLR 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 SLR Investment will offset losses from the drop in SLR Investment's long position.The idea behind PennantPark Investment and SLR Investment Corp 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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