Correlation Between Q2 Holdings and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both Q2 Holdings 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 Q2 Holdings and PennantPark Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Q2 Holdings and PennantPark Investment, you can compare the effects of market volatilities on Q2 Holdings 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 Q2 Holdings with a short position of PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and PennantPark Investment.
Diversification Opportunities for Q2 Holdings and PennantPark Investment
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between QTWO and PennantPark is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings i.e., Q2 Holdings and PennantPark Investment go up and down completely randomly.
Pair Corralation between Q2 Holdings and PennantPark Investment
Given the investment horizon of 90 days Q2 Holdings is expected to generate 2.26 times more return on investment than PennantPark Investment. However, Q2 Holdings is 2.26 times more volatile than PennantPark Investment. It trades about 0.15 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.09 per unit of risk. If you would invest 2,821 in Q2 Holdings on August 31, 2024 and sell it today you would earn a total of 7,653 from holding Q2 Holdings or generate 271.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Q2 Holdings vs. PennantPark Investment
Performance |
| Timeline |
| Q2 Holdings |
| PennantPark Investment |
Q2 Holdings and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Q2 Holdings and PennantPark Investment
The main advantage of trading using opposite Q2 Holdings and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings 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.| Q2 Holdings vs. PROS Holdings | Q2 Holdings vs. Meridianlink | Q2 Holdings vs. Enfusion | Q2 Holdings vs. Paylocity Holdng |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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