Correlation Between PennantPark Floating and APACHE

Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and APACHE 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 APACHE 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 APACHE P 6, you can compare the effects of market volatilities on PennantPark Floating and APACHE 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 APACHE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and APACHE.

Diversification Opportunities for PennantPark Floating and APACHE

0.33

Correlation Coefficient

PennantPark Floating  APACHE

Weak diversification

The 3 months correlation between PennantPark and APACHE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and APACHE P 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APACHE P 6 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 APACHE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APACHE P 6 has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and APACHE go up and down completely randomly.

Pair Corralation between PennantPark Floating and APACHE

Given the investment horizon of 90 days PennantPark Floating Rate is expected to generate 0.84 times more return on investment than APACHE. However, PennantPark Floating Rate is 1.19 times less risky than APACHE. It trades about -0.04 of its potential returns per unit of risk. APACHE P 6 is currently generating about -0.04 per unit of risk. If you would invest  1,132  in PennantPark Floating Rate on September 17, 2024 and sell it today you would lose (29.00) from holding PennantPark Floating Rate or give up 2.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.54%
Values	Daily Returns

PennantPark Floating Rate  vs.  APACHE P 6

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

APACHE P 6

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APACHE P 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APACHE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PennantPark Floating and APACHE

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

The idea behind PennantPark Floating Rate and APACHE P 6 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.