Correlation Between PennantPark Floating and Western Acquisition

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

Diversification Opportunities for PennantPark Floating and Western Acquisition

0.26

Correlation Coefficient

PennantPark Floating  Western Acquisition

Modest diversification

The 3 months correlation between PennantPark and Western is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Western Acquisition go up and down completely randomly.

Pair Corralation between PennantPark Floating and Western Acquisition

Given the investment horizon of 90 days PennantPark Floating Rate is expected to generate 0.24 times more return on investment than Western Acquisition. However, PennantPark Floating Rate is 4.23 times less risky than Western Acquisition. It trades about 0.16 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about -0.12 per unit of risk. If you would invest  1,082  in PennantPark Floating Rate on October 26, 2024 and sell it today you would earn a total of  44.00  from holding PennantPark Floating Rate or generate 4.07% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  Western Acquisition Ventures

PennantPark Floating Rate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Western Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Acquisition Ventures 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PennantPark Floating and Western Acquisition

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

The idea behind PennantPark Floating Rate and Western Acquisition Ventures 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.