Correlation Between PennantPark Floating and Kaiser Aluminum

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

Diversification Opportunities for PennantPark Floating and Kaiser Aluminum

-0.45

Correlation Coefficient

PennantPark Floating  Kaiser Aluminum

Very good diversification

The 3 months correlation between PennantPark and Kaiser is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between PennantPark Floating and Kaiser Aluminum

Given the investment horizon of 90 days PennantPark Floating is expected to generate 12.7 times less return on investment than Kaiser Aluminum. But when comparing it to its historical volatility, PennantPark Floating Rate is 3.11 times less risky than Kaiser Aluminum. It trades about 0.03 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,958  in Kaiser Aluminum on September 1, 2024 and sell it today you would earn a total of  1,170  from holding Kaiser Aluminum or generate 16.82% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  Kaiser Aluminum

PennantPark Floating Rate

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Kaiser Aluminum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Kaiser Aluminum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and Kaiser Aluminum

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

The idea behind PennantPark Floating Rate and Kaiser Aluminum 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.