Correlation Between PennantPark Floating and Topbuild Corp

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

Diversification Opportunities for PennantPark Floating and Topbuild Corp

0.71

Correlation Coefficient

PennantPark Floating  Topbuild Corp

Poor diversification

The 3 months correlation between PennantPark and Topbuild is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp 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 Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Topbuild Corp go up and down completely randomly.

Pair Corralation between PennantPark Floating and Topbuild Corp

Given the investment horizon of 90 days PennantPark Floating Rate is expected to generate 0.36 times more return on investment than Topbuild Corp. However, PennantPark Floating Rate is 2.79 times less risky than Topbuild Corp. It trades about -0.15 of its potential returns per unit of risk. Topbuild Corp is currently generating about -0.59 per unit of risk. 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

PennantPark Floating Rate  vs.  Topbuild Corp

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.

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.

Pair Trading with PennantPark Floating and Topbuild Corp

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

The idea behind PennantPark Floating Rate and Topbuild Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.