Correlation Between Equinix and PennantPark Floating

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

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

Diversification Opportunities for Equinix and PennantPark Floating

-0.09

Correlation Coefficient

Equinix  PennantPark Floating

Good diversification

The 3 months correlation between Equinix and PennantPark is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Equinix 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 Equinix 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 Equinix 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 Equinix i.e., Equinix and PennantPark Floating go up and down completely randomly.

Pair Corralation between Equinix and PennantPark Floating

Given the investment horizon of 90 days Equinix is expected to generate 1.15 times more return on investment than PennantPark Floating. However, Equinix is 1.15 times more volatile than PennantPark Floating Rate. It trades about 0.06 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.04 per unit of risk. If you would invest  67,939  in Equinix on September 3, 2024 and sell it today you would earn a total of  30,209  from holding Equinix or generate 44.46% return on investment over 90 days.

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

Equinix  vs.  PennantPark Floating Rate

Equinix

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix showed solid returns over the last few months and may actually be approaching a breakup point.

PennantPark Floating Rate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 2 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Equinix and PennantPark Floating

The main advantage of trading using opposite Equinix and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.