Correlation Between Ares Capital and PennantPark Floating
Can any of the company-specific risk be diversified away by investing in both Ares Capital and PennantPark Floating 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 Ares Capital and PennantPark Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and PennantPark Floating Rate, you can compare the effects of market volatilities on Ares Capital and PennantPark Floating 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 Ares Capital with a short position of PennantPark Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and PennantPark Floating.
Diversification Opportunities for Ares Capital and PennantPark Floating
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ares and PennantPark is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and PennantPark Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Floating Rate and Ares Capital 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 Ares Capital are associated (or correlated) with PennantPark Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Floating Rate has no effect on the direction of Ares Capital i.e., Ares Capital and PennantPark Floating go up and down completely randomly.
Pair Corralation between Ares Capital and PennantPark Floating
Given the investment horizon of 90 days Ares Capital is expected to generate 1.35 times more return on investment than PennantPark Floating. However, Ares Capital is 1.35 times more volatile than PennantPark Floating Rate. It trades about 0.43 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.27 per unit of risk. If you would invest 2,189 in Ares Capital on November 1, 2024 and sell it today you would earn a total of 152.00 from holding Ares Capital or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. PennantPark Floating Rate
Performance |
| Timeline |
| Ares Capital |
| PennantPark Floating Rate |
Ares Capital and PennantPark Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and PennantPark Floating
The main advantage of trading using opposite Ares Capital and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, PennantPark Floating 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 Floating will offset losses from the drop in PennantPark Floating's long position.| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
| PennantPark Floating vs. Gladstone Investment | PennantPark Floating vs. Horizon Technology Finance | PennantPark Floating vs. Stellus Capital Investment | PennantPark Floating vs. Prospect 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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