Correlation Between PennantPark Floating and Citizens

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

Diversification Opportunities for PennantPark Floating and Citizens

0.23

Correlation Coefficient

PennantPark Floating  Citizens

Modest diversification

The 3 months correlation between PennantPark and Citizens is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens 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 Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Citizens go up and down completely randomly.

Pair Corralation between PennantPark Floating and Citizens

Given the investment horizon of 90 days PennantPark Floating Rate is expected to under-perform the Citizens. But the stock apears to be less risky and, when comparing its historical volatility, PennantPark Floating Rate is 5.97 times less risky than Citizens. The stock trades about -0.02 of its potential returns per unit of risk. The Citizens is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  303.00  in Citizens on September 4, 2024 and sell it today you would earn a total of  136.00  from holding Citizens or generate 44.88% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  Citizens

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Citizens

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and Citizens

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

The idea behind PennantPark Floating Rate and Citizens 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.