Correlation Between Topbuild Corp and PennantPark Floating

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

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

Diversification Opportunities for Topbuild Corp and PennantPark Floating

0.71

Correlation Coefficient

Topbuild Corp  PennantPark Floating

Poor diversification

The 3 months correlation between Topbuild and PennantPark is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp 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 Topbuild Corp 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 Topbuild Corp 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 Topbuild Corp i.e., Topbuild Corp and PennantPark Floating go up and down completely randomly.

Pair Corralation between Topbuild Corp and PennantPark Floating

Considering the 90-day investment horizon Topbuild Corp is expected to under-perform the PennantPark Floating. In addition to that, Topbuild Corp is 2.79 times more volatile than PennantPark Floating Rate. It trades about -0.59 of its total potential returns per unit of risk. PennantPark Floating Rate is currently generating about -0.15 per unit of volatility. If you would invest  1,106  in PennantPark Floating Rate on September 29, 2024 and sell it today you would lose (23.00) from holding PennantPark Floating Rate or give up 2.08% of portfolio value over 90 days.

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

Topbuild Corp  vs.  PennantPark Floating Rate

Topbuild Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PennantPark Floating Rate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennantPark Floating Rate has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Topbuild Corp and PennantPark Floating

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.