Correlation Between PennantPark Floating and JBG SMITH

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

Diversification Opportunities for PennantPark Floating and JBG SMITH

0.74

Correlation Coefficient

PennantPark Floating  JBG SMITH

Poor diversification

The 3 months correlation between PennantPark and JBG is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties 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 JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and JBG SMITH go up and down completely randomly.

Pair Corralation between PennantPark Floating and JBG SMITH

Given the investment horizon of 90 days PennantPark Floating Rate is expected to under-perform the JBG SMITH. But the stock apears to be less risky and, when comparing its historical volatility, PennantPark Floating Rate is 3.9 times less risky than JBG SMITH. The stock trades about -0.19 of its potential returns per unit of risk. The JBG SMITH Properties is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,550  in JBG SMITH Properties on September 21, 2024 and sell it today you would lose (14.00) from holding JBG SMITH Properties or give up 0.9% 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.  JBG SMITH Properties

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.

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PennantPark Floating and JBG SMITH

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

The idea behind PennantPark Floating Rate and JBG SMITH Properties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.