Correlation Between PennantPark Floating and TPG

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

Diversification Opportunities for PennantPark Floating and TPG

-0.36

Correlation Coefficient

PennantPark Floating  TPG

Very good diversification

The 3 months correlation between PennantPark and TPG is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and TPG Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Inc 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 TPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Inc has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and TPG go up and down completely randomly.

Pair Corralation between PennantPark Floating and TPG

Given the investment horizon of 90 days PennantPark Floating Rate is expected to generate 0.45 times more return on investment than TPG. However, PennantPark Floating Rate is 2.21 times less risky than TPG. It trades about 0.08 of its potential returns per unit of risk. TPG Inc is currently generating about -0.2 per unit of risk. If you would invest  1,077  in PennantPark Floating Rate on November 27, 2024 and sell it today you would earn a total of  43.00  from holding PennantPark Floating Rate or generate 3.99% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  TPG Inc

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 6 (%) 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.

TPG Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPG Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PennantPark Floating and TPG

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

The idea behind PennantPark Floating Rate and TPG Inc 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.