Correlation Between SHBASS and PennantPark Floating

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

By analyzing existing cross correlation between SHBASS 365 10 JUN 25 and PennantPark Floating Rate, you can compare the effects of market volatilities on SHBASS 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 SHBASS with a short position of PennantPark Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHBASS and PennantPark Floating.

Diversification Opportunities for SHBASS and PennantPark Floating

0.7

Correlation Coefficient

SHBASS  PennantPark Floating

Poor diversification

The 3 months correlation between SHBASS and PennantPark is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SHBASS 365 10 JUN 25 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 SHBASS 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 SHBASS 365 10 JUN 25 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 SHBASS i.e., SHBASS and PennantPark Floating go up and down completely randomly.

Pair Corralation between SHBASS and PennantPark Floating

Assuming the 90 days trading horizon SHBASS 365 10 JUN 25 is expected to under-perform the PennantPark Floating. But the bond apears to be less risky and, when comparing its historical volatility, SHBASS 365 10 JUN 25 is 1.75 times less risky than PennantPark Floating. The bond trades about -0.26 of its potential returns per unit of risk. The PennantPark Floating Rate is currently generating about 0.15 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  85.50  from holding PennantPark Floating Rate or generate 8.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	20.0%
Values	Daily Returns

SHBASS 365 10 JUN 25  vs.  PennantPark Floating Rate

SHBASS 365 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHBASS 365 10 JUN 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SHBASS 365 10 JUN 25 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 11 (%) 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 SHBASS and PennantPark Floating

The main advantage of trading using opposite SHBASS and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHBASS 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 SHBASS 365 10 JUN 25 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.