Correlation Between Gold Bond and PennantPark Floating

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

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

Diversification Opportunities for Gold Bond and PennantPark Floating

0.87

Correlation Coefficient

Gold Bond  PennantPark Floating

Very poor diversification

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

Pair Corralation between Gold Bond and PennantPark Floating

Assuming the 90 days trading horizon Gold Bond is expected to generate 3.12 times less return on investment than PennantPark Floating. But when comparing it to its historical volatility, The Gold Bond is 4.3 times less risky than PennantPark Floating. It trades about 0.29 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 15, 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

The Gold Bond  vs.  PennantPark Floating Rate

Gold Bond

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bond are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bond 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 Gold Bond and PennantPark Floating

The main advantage of trading using opposite Gold Bond and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Bond 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 The Gold Bond 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.