Correlation Between Analyst IMS and PennantPark Floating

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

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

Diversification Opportunities for Analyst IMS and PennantPark Floating

0.87

Correlation Coefficient

Analyst IMS  PennantPark Floating

Very poor diversification

The 3 months correlation between Analyst and PennantPark is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Analyst IMS Investment 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 Analyst IMS 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 Analyst IMS Investment 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 Analyst IMS i.e., Analyst IMS and PennantPark Floating go up and down completely randomly.

Pair Corralation between Analyst IMS and PennantPark Floating

Assuming the 90 days trading horizon Analyst IMS is expected to generate 2.39 times less return on investment than PennantPark Floating. But when comparing it to its historical volatility, Analyst IMS Investment is 4.31 times less risky than PennantPark Floating. It trades about 0.38 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,375  in PennantPark Floating Rate on September 16, 2024 and sell it today you would earn a total of  1,798  from holding PennantPark Floating Rate or generate 75.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.87%
Values	Daily Returns

Analyst IMS Investment  vs.  PennantPark Floating Rate

Analyst IMS Investment

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Analyst IMS Investment are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Analyst IMS sustained solid returns over the last few months and may actually be approaching a breakup point.

PennantPark Floating Rate

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PennantPark Floating sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analyst IMS and PennantPark Floating

The main advantage of trading using opposite Analyst IMS and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analyst IMS 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 Analyst IMS Investment 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.