Correlation Between PennantPark Floating and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and Hercules Capital 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 Hercules Capital 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 Hercules Capital, you can compare the effects of market volatilities on PennantPark Floating and Hercules Capital 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 Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and Hercules Capital.
Diversification Opportunities for PennantPark Floating and Hercules Capital
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PennantPark and Hercules is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital 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 Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Hercules Capital go up and down completely randomly.
Pair Corralation between PennantPark Floating and Hercules Capital
Given the investment horizon of 90 days PennantPark Floating is expected to generate 3.21 times less return on investment than Hercules Capital. But when comparing it to its historical volatility, PennantPark Floating Rate is 1.74 times less risky than Hercules Capital. It trades about 0.09 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,884 in Hercules Capital on November 1, 2024 and sell it today you would earn a total of 222.00 from holding Hercules Capital or generate 11.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennantPark Floating Rate vs. Hercules Capital
Performance |
| Timeline |
| PennantPark Floating Rate |
| Hercules Capital |
PennantPark Floating and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Floating and Hercules Capital
The main advantage of trading using opposite PennantPark Floating and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Floating position performs unexpectedly, Hercules Capital 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 Hercules Capital will offset losses from the drop in Hercules Capital'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 |
| Hercules Capital vs. Main Street Capital | Hercules Capital vs. PennantPark Floating Rate | Hercules Capital vs. FS KKR Capital | Hercules Capital 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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