Correlation Between National Health and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both National Health 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 National Health and PennantPark Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Health Investors and PennantPark Investment, you can compare the effects of market volatilities on National Health 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 National Health with a short position of PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and PennantPark Investment.
Diversification Opportunities for National Health and PennantPark Investment
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and PennantPark is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and National Health 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 National Health Investors 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 National Health i.e., National Health and PennantPark Investment go up and down completely randomly.
Pair Corralation between National Health and PennantPark Investment
Assuming the 90 days trading horizon National Health is expected to generate 1.08 times less return on investment than PennantPark Investment. But when comparing it to its historical volatility, National Health Investors is 1.19 times less risky than PennantPark Investment. It trades about 0.06 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 402.00 in PennantPark Investment on September 3, 2024 and sell it today you would earn a total of 230.00 from holding PennantPark Investment or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. PennantPark Investment
Performance |
| Timeline |
| National Health Investors |
| PennantPark Investment |
National Health and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and PennantPark Investment
The main advantage of trading using opposite National Health and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| PennantPark Investment vs. Blackstone Group | PennantPark Investment vs. BlackRock | PennantPark Investment vs. The Bank of | PennantPark Investment vs. Ameriprise Financial |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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