Correlation Between PennantPark Floating and Bank of America

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

Diversification Opportunities for PennantPark Floating and Bank of America

0.65

Correlation Coefficient

PennantPark Floating  Bank of America

Poor diversification

The 3 months correlation between PennantPark and Bank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Bank of America go up and down completely randomly.

Pair Corralation between PennantPark Floating and Bank of America

Given the investment horizon of 90 days PennantPark Floating Rate is expected to under-perform the Bank of America. In addition to that, PennantPark Floating is 1.64 times more volatile than Bank of America. It trades about 0.0 of its total potential returns per unit of risk. Bank of America is currently generating about 0.07 per unit of volatility. If you would invest  115,630  in Bank of America on September 29, 2024 and sell it today you would earn a total of  5,718  from holding Bank of America or generate 4.95% 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.  Bank of America

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.

Bank of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PennantPark Floating and Bank of America

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

The idea behind PennantPark Floating Rate and Bank of America 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 Stocks Directory module to find actively traded stocks across global markets.