Correlation Between PennantPark Floating and Old Republic

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

Diversification Opportunities for PennantPark Floating and Old Republic

-0.42

Correlation Coefficient

PennantPark Floating  Old Republic

Very good diversification

The 3 months correlation between PennantPark and Old is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Old Republic go up and down completely randomly.

Pair Corralation between PennantPark Floating and Old Republic

Given the investment horizon of 90 days PennantPark Floating Rate is expected to under-perform the Old Republic. But the stock apears to be less risky and, when comparing its historical volatility, PennantPark Floating Rate is 1.42 times less risky than Old Republic. The stock trades about -0.03 of its potential returns per unit of risk. The Old Republic International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,430  in Old Republic International on September 12, 2024 and sell it today you would earn a total of  211.00  from holding Old Republic International or generate 6.15% 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.  Old Republic International

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.

Old Republic Interna

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PennantPark Floating and Old Republic

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

The idea behind PennantPark Floating Rate and Old Republic International 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.