Correlation Between PennantPark Floating and REALTY

Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and REALTY 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 REALTY 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 REALTY INCOME P, you can compare the effects of market volatilities on PennantPark Floating and REALTY 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 REALTY. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and REALTY.

Diversification Opportunities for PennantPark Floating and REALTY

-0.15

Correlation Coefficient

PennantPark Floating  REALTY

Good diversification

The 3 months correlation between PennantPark and REALTY is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and REALTY INCOME P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REALTY INCOME P 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 REALTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REALTY INCOME P has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and REALTY go up and down completely randomly.

Pair Corralation between PennantPark Floating and REALTY

Given the investment horizon of 90 days PennantPark Floating Rate is expected to generate 1.49 times more return on investment than REALTY. However, PennantPark Floating is 1.49 times more volatile than REALTY INCOME P. It trades about 0.09 of its potential returns per unit of risk. REALTY INCOME P is currently generating about -0.04 per unit of risk. If you would invest  1,067  in PennantPark Floating Rate on July 11, 2024 and sell it today you would earn a total of  107.00  from holding PennantPark Floating Rate or generate 10.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.4%
Values	Daily Returns

PennantPark Floating Rate  vs.  REALTY INCOME P

PennantPark Floating Rate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, PennantPark Floating is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

REALTY INCOME P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REALTY INCOME P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, REALTY 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 Floating and REALTY

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

The idea behind PennantPark Floating Rate and REALTY INCOME P 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.