Correlation Between Addus HomeCare and PennantPark Floating

Can any of the company-specific risk be diversified away by investing in both Addus HomeCare 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 Addus HomeCare and PennantPark Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Addus HomeCare and PennantPark Floating Rate, you can compare the effects of market volatilities on Addus HomeCare 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 Addus HomeCare with a short position of PennantPark Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and PennantPark Floating.

Diversification Opportunities for Addus HomeCare and PennantPark Floating

0.33

Correlation Coefficient

Addus HomeCare  PennantPark Floating

Weak diversification

The 3 months correlation between Addus and PennantPark is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare i.e., Addus HomeCare and PennantPark Floating go up and down completely randomly.

Pair Corralation between Addus HomeCare and PennantPark Floating

Given the investment horizon of 90 days Addus HomeCare is expected to generate 2.45 times more return on investment than PennantPark Floating. However, Addus HomeCare is 2.45 times more volatile than PennantPark Floating Rate. It trades about 0.02 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.02 per unit of risk. If you would invest  12,829  in Addus HomeCare on October 26, 2024 and sell it today you would earn a total of  125.50  from holding Addus HomeCare or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  PennantPark Floating Rate

Addus HomeCare

Risk-Adjusted Performance

1 of 100

Insignificant

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

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.

Pair Trading with Addus HomeCare and PennantPark Floating

The main advantage of trading using opposite Addus HomeCare and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare 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.

The idea behind Addus HomeCare and PennantPark Floating Rate 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.