Correlation Between PennantPark Floating and Direct Line
Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and Direct Line 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 Floating and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennantPark Floating Rate and Direct Line Insurance, you can compare the effects of market volatilities on PennantPark Floating and Direct Line 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 Floating with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and Direct Line.
Diversification Opportunities for PennantPark Floating and Direct Line
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PennantPark and Direct is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance and PennantPark Floating 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 Floating Rate are associated (or correlated) with Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Direct Line go up and down completely randomly.
Pair Corralation between PennantPark Floating and Direct Line
Given the investment horizon of 90 days PennantPark Floating is expected to generate 1.88 times less return on investment than Direct Line. But when comparing it to its historical volatility, PennantPark Floating Rate is 2.35 times less risky than Direct Line. It trades about 0.04 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 978.00 in Direct Line Insurance on September 2, 2024 and sell it today you would earn a total of 203.00 from holding Direct Line Insurance or generate 20.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.76% |
| Values | Daily Returns |
PennantPark Floating Rate vs. Direct Line Insurance
Performance |
| Timeline |
| PennantPark Floating Rate |
| Direct Line Insurance |
PennantPark Floating and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Floating and Direct Line
The main advantage of trading using opposite PennantPark Floating and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Floating position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| PennantPark Floating vs. Gladstone Investment | PennantPark Floating vs. Horizon Technology Finance | PennantPark Floating vs. Stellus Capital Investment | PennantPark Floating vs. Prospect Capital |
| Direct Line vs. Ryanair Holdings PLC | Direct Line vs. Air Transport Services | Direct Line vs. Xunlei Ltd Adr | Direct Line vs. Boston Omaha Corp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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