Correlation Between PennantPark Floating and Rocky Brands

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

Diversification Opportunities for PennantPark Floating and Rocky Brands

0.77

Correlation Coefficient

PennantPark Floating  Rocky Brands

Poor diversification

The 3 months correlation between PennantPark and Rocky is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands 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 Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Rocky Brands go up and down completely randomly.

Pair Corralation between PennantPark Floating and Rocky Brands

Given the investment horizon of 90 days PennantPark Floating is expected to generate 1.11 times less return on investment than Rocky Brands. But when comparing it to its historical volatility, PennantPark Floating Rate is 3.24 times less risky than Rocky Brands. It trades about 0.03 of its potential returns per unit of risk. Rocky Brands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,804  in Rocky Brands on October 10, 2024 and sell it today you would lose (549.00) from holding Rocky Brands or give up 19.58% 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.  Rocky Brands

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.

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands 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 forward-looking signals remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PennantPark Floating and Rocky Brands

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

The idea behind PennantPark Floating Rate and Rocky Brands 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..