Correlation Between KINDER and PennantPark Floating

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

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

Diversification Opportunities for KINDER and PennantPark Floating

-0.22

Correlation Coefficient

KINDER  PennantPark Floating

Very good diversification

The 3 months correlation between KINDER and PennantPark is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC 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 KINDER 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 KINDER MORGAN INC 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 KINDER i.e., KINDER and PennantPark Floating go up and down completely randomly.

Pair Corralation between KINDER and PennantPark Floating

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to under-perform the PennantPark Floating. But the bond apears to be less risky and, when comparing its historical volatility, KINDER MORGAN INC is 9.14 times less risky than PennantPark Floating. The bond trades about -0.07 of its potential returns per unit of risk. The PennantPark Floating Rate is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,050  in PennantPark Floating Rate on December 25, 2024 and sell it today you would earn a total of  75.00  from holding PennantPark Floating Rate or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

KINDER MORGAN INC  vs.  PennantPark Floating Rate

KINDER MORGAN INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 10 (%) 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 KINDER and PennantPark Floating

The main advantage of trading using opposite KINDER and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINDER 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 KINDER MORGAN INC 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.