Correlation Between Ford and PennantPark Floating
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and PennantPark Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and PennantPark Floating Rate, you can compare the effects of market volatilities on Ford 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 Ford with a short position of PennantPark Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and PennantPark Floating.
Diversification Opportunities for Ford and PennantPark Floating
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and PennantPark is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and PennantPark Floating go up and down completely randomly.
Pair Corralation between Ford and PennantPark Floating
Taking into account the 90-day investment horizon Ford is expected to generate 361.07 times less return on investment than PennantPark Floating. But when comparing it to its historical volatility, Ford Motor is 3.27 times less risky than PennantPark Floating. It trades about 0.0 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 28,304 in PennantPark Floating Rate on November 1, 2024 and sell it today you would lose (24,131) from holding PennantPark Floating Rate or give up 85.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 77.89% |
| Values | Daily Returns |
Ford Motor vs. PennantPark Floating Rate
Performance |
| Timeline |
| Ford Motor |
| PennantPark Floating Rate |
Ford and PennantPark Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and PennantPark Floating
The main advantage of trading using opposite Ford and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| PennantPark Floating vs. First International Bank | PennantPark Floating vs. Mivtach Shamir | PennantPark Floating vs. Atreyu Capital Markets | PennantPark Floating vs. IDI Insurance |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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