Correlation Between PennantPark Investment and Great Elm

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

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

Diversification Opportunities for PennantPark Investment and Great Elm

0.31

Correlation Coefficient

PennantPark Investment  Great Elm

Weak diversification

The 3 months correlation between PennantPark and Great is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital 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 Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of PennantPark Investment i.e., PennantPark Investment and Great Elm go up and down completely randomly.

Pair Corralation between PennantPark Investment and Great Elm

Given the investment horizon of 90 days PennantPark Investment is expected to generate 3.53 times more return on investment than Great Elm. However, PennantPark Investment is 3.53 times more volatile than Great Elm Capital. It trades about 0.05 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.09 per unit of risk. If you would invest  669.00  in PennantPark Investment on September 12, 2024 and sell it today you would earn a total of  20.00  from holding PennantPark Investment or generate 2.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.63%
Values	Daily Returns

PennantPark Investment  vs.  Great Elm Capital

PennantPark Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Great Elm Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PennantPark Investment and Great Elm

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

The idea behind PennantPark Investment and Great Elm Capital 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..