Correlation Between PennantPark Investment and Aegon NV

Can any of the company-specific risk be diversified away by investing in both PennantPark Investment and Aegon NV 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 Aegon NV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PennantPark Investment and Aegon NV ADR, you can compare the effects of market volatilities on PennantPark Investment and Aegon NV 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 Aegon NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and Aegon NV.

Diversification Opportunities for PennantPark Investment and Aegon NV

0.29

Correlation Coefficient

PennantPark Investment  Aegon NV

Modest diversification

The 3 months correlation between PennantPark and Aegon is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR 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 Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Aegon NV go up and down completely randomly.

Pair Corralation between PennantPark Investment and Aegon NV

Given the investment horizon of 90 days PennantPark Investment is expected to generate 2.1 times less return on investment than Aegon NV. But when comparing it to its historical volatility, PennantPark Investment is 1.36 times less risky than Aegon NV. It trades about 0.06 of its potential returns per unit of risk. Aegon NV ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  592.00  in Aegon NV ADR on September 12, 2024 and sell it today you would earn a total of  44.00  from holding Aegon NV ADR or generate 7.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PennantPark Investment  vs.  Aegon NV ADR

PennantPark Investment

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aegon NV ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aegon NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennantPark Investment and Aegon NV

The main advantage of trading using opposite PennantPark Investment and Aegon NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment position performs unexpectedly, Aegon NV 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 Aegon NV will offset losses from the drop in Aegon NV's long position.

The idea behind PennantPark Investment and Aegon NV ADR 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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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.