Correlation Between PennantPark Floating and Stellus Capital

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

Diversification Opportunities for PennantPark Floating and Stellus Capital

0.92

Correlation Coefficient

PennantPark Floating  Stellus Capital

Almost no diversification

The 3 months correlation between PennantPark and Stellus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Stellus Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellus Capital Inve 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 Stellus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellus Capital Inve has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Stellus Capital go up and down completely randomly.

Pair Corralation between PennantPark Floating and Stellus Capital

Given the investment horizon of 90 days PennantPark Floating is expected to generate 3.71 times less return on investment than Stellus Capital. In addition to that, PennantPark Floating is 1.06 times more volatile than Stellus Capital Investment. It trades about 0.07 of its total potential returns per unit of risk. Stellus Capital Investment is currently generating about 0.26 per unit of volatility. If you would invest  1,353  in Stellus Capital Investment on November 28, 2024 and sell it today you would earn a total of  184.00  from holding Stellus Capital Investment or generate 13.6% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  Stellus Capital Investment

PennantPark Floating Rate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 5 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Stellus Capital Inve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Stellus Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and Stellus Capital

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

The idea behind PennantPark Floating Rate and Stellus Capital Investment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.