Correlation Between PennantPark Investment and NorthWestern
Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and NorthWestern 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 NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennantPark Investment and NorthWestern, you can compare the effects of market volatilities on PennantPark Investment and NorthWestern 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 NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and NorthWestern.
Diversification Opportunities for PennantPark Investment and NorthWestern
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between PennantPark and NorthWestern is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern 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 NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and NorthWestern go up and down completely randomly.
Pair Corralation between PennantPark Investment and NorthWestern
Given the investment horizon of 90 days PennantPark Investment is expected to generate 7.02 times less return on investment than NorthWestern. In addition to that, PennantPark Investment is 1.24 times more volatile than NorthWestern. It trades about 0.02 of its total potential returns per unit of risk. NorthWestern is currently generating about 0.15 per unit of volatility. If you would invest 5,250 in NorthWestern on October 20, 2024 and sell it today you would earn a total of 190.00 from holding NorthWestern or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennantPark Investment vs. NorthWestern
Performance |
| Timeline |
| PennantPark Investment |
| NorthWestern |
PennantPark Investment and NorthWestern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Investment and NorthWestern
The main advantage of trading using opposite PennantPark Investment and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.| PennantPark Investment vs. Sixth Street Specialty | PennantPark Investment vs. New Mountain Finance | PennantPark Investment vs. Carlyle Secured Lending | PennantPark Investment vs. BlackRock TCP Capital |
| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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