Correlation Between PennantPark Floating and Shake Shack

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

Diversification Opportunities for PennantPark Floating and Shake Shack

-0.77

Correlation Coefficient

PennantPark Floating  Shake Shack

Pay attention - limited upside

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

Pair Corralation between PennantPark Floating and Shake Shack

Given the investment horizon of 90 days PennantPark Floating Rate is expected to generate 0.27 times more return on investment than Shake Shack. However, PennantPark Floating Rate is 3.74 times less risky than Shake Shack. It trades about 0.12 of its potential returns per unit of risk. Shake Shack is currently generating about -0.09 per unit of risk. If you would invest  1,069  in PennantPark Floating Rate on December 1, 2024 and sell it today you would earn a total of  65.00  from holding PennantPark Floating Rate or generate 6.08% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  Shake Shack

PennantPark Floating Rate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, PennantPark Floating may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shake Shack

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shake Shack has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PennantPark Floating and Shake Shack

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

The idea behind PennantPark Floating Rate and Shake Shack 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.