Correlation Between ServiceNow and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both ServiceNow 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 ServiceNow and PennantPark Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and PennantPark Investment, you can compare the effects of market volatilities on ServiceNow 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 ServiceNow with a short position of PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and PennantPark Investment.
Diversification Opportunities for ServiceNow and PennantPark Investment
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ServiceNow and PennantPark is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and ServiceNow 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 ServiceNow 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 ServiceNow i.e., ServiceNow and PennantPark Investment go up and down completely randomly.
Pair Corralation between ServiceNow and PennantPark Investment
Considering the 90-day investment horizon ServiceNow is expected to generate 1.79 times more return on investment than PennantPark Investment. However, ServiceNow is 1.79 times more volatile than PennantPark Investment. It trades about 0.1 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.09 per unit of risk. If you would invest 53,534 in ServiceNow on August 31, 2024 and sell it today you would earn a total of 51,410 from holding ServiceNow or generate 96.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ServiceNow vs. PennantPark Investment
Performance |
| Timeline |
| ServiceNow |
| PennantPark Investment |
ServiceNow and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and PennantPark Investment
The main advantage of trading using opposite ServiceNow and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow 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.| ServiceNow vs. Autodesk | ServiceNow vs. Intuit Inc | ServiceNow vs. Zoom Video Communications | ServiceNow vs. Snowflake |
| PennantPark Investment vs. Ares Capital | PennantPark Investment vs. Hercules Capital | PennantPark Investment vs. Main Street Capital |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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