Correlation Between Shake Shack and PennantPark Floating

Can any of the company-specific risk be diversified away by investing in both Shake Shack and PennantPark Floating 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 Shake Shack and PennantPark Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shake Shack and PennantPark Floating Rate, you can compare the effects of market volatilities on Shake Shack and PennantPark Floating 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 Shake Shack with a short position of PennantPark Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shake Shack and PennantPark Floating.

Diversification Opportunities for Shake Shack and PennantPark Floating

-0.65

Correlation Coefficient

Shake Shack  PennantPark Floating

Excellent diversification

The 3 months correlation between Shake and PennantPark is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shake Shack and PennantPark Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Floating Rate and Shake Shack 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 Shake Shack are associated (or correlated) with PennantPark Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Floating Rate has no effect on the direction of Shake Shack i.e., Shake Shack and PennantPark Floating go up and down completely randomly.

Pair Corralation between Shake Shack and PennantPark Floating

Given the investment horizon of 90 days Shake Shack is expected to under-perform the PennantPark Floating. In addition to that, Shake Shack is 3.93 times more volatile than PennantPark Floating Rate. It trades about -0.16 of its total potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.12 per unit of volatility. If you would invest  1,056  in PennantPark Floating Rate on December 30, 2024 and sell it today you would earn a total of  72.00  from holding PennantPark Floating Rate or generate 6.82% return on investment over 90 days.

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

Shake Shack  vs.  PennantPark Floating Rate

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.

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.

Pair Trading with Shake Shack and PennantPark Floating

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

The idea behind Shake Shack and PennantPark Floating Rate 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.