Correlation Between PennantPark Floating and BBB Foods
Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on PennantPark Floating and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and BBB Foods.
Diversification Opportunities for PennantPark Floating and BBB Foods
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PennantPark and BBB is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and BBB Foods go up and down completely randomly.
Pair Corralation between PennantPark Floating and BBB Foods
Given the investment horizon of 90 days PennantPark Floating is expected to generate 5.26 times less return on investment than BBB Foods. But when comparing it to its historical volatility, PennantPark Floating Rate is 2.89 times less risky than BBB Foods. It trades about 0.05 of its potential returns per unit of risk. BBB Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,750 in BBB Foods on November 2, 2024 and sell it today you would earn a total of 1,359 from holding BBB Foods or generate 77.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 49.8% |
| Values | Daily Returns |
PennantPark Floating Rate vs. BBB Foods
Performance |
| Timeline |
| PennantPark Floating Rate |
| BBB Foods |
PennantPark Floating and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Floating and BBB Foods
The main advantage of trading using opposite PennantPark Floating and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Floating position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| PennantPark Floating vs. Gladstone Investment | PennantPark Floating vs. Horizon Technology Finance | PennantPark Floating vs. Stellus Capital Investment | PennantPark Floating vs. Prospect Capital |
| BBB Foods vs. Old Dominion Freight | BBB Foods vs. Delek Logistics Partners | BBB Foods vs. Weyco Group | BBB Foods vs. Radcom |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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