Correlation Between Fernhill Corp and Pennexx Foods

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

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

Diversification Opportunities for Fernhill Corp and Pennexx Foods

0.05

Correlation Coefficient

Fernhill Corp  Pennexx Foods

Significant diversification

The 3 months correlation between Fernhill and Pennexx is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Fernhill Corp and Pennexx Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennexx Foods and Fernhill Corp 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 Fernhill Corp are associated (or correlated) with Pennexx Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pennexx Foods has no effect on the direction of Fernhill Corp i.e., Fernhill Corp and Pennexx Foods go up and down completely randomly.

Pair Corralation between Fernhill Corp and Pennexx Foods

Given the investment horizon of 90 days Fernhill Corp is expected to generate 1.15 times more return on investment than Pennexx Foods. However, Fernhill Corp is 1.15 times more volatile than Pennexx Foods. It trades about 0.11 of its potential returns per unit of risk. Pennexx Foods is currently generating about -0.1 per unit of risk. If you would invest  0.08  in Fernhill Corp on October 26, 2024 and sell it today you would earn a total of  0.04  from holding Fernhill Corp or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Fernhill Corp  vs.  Pennexx Foods

Fernhill Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fernhill Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fernhill Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pennexx Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pennexx Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fernhill Corp and Pennexx Foods

The main advantage of trading using opposite Fernhill Corp and Pennexx Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fernhill Corp position performs unexpectedly, Pennexx Foods 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 Pennexx Foods will offset losses from the drop in Pennexx Foods' long position.

The idea behind Fernhill Corp and Pennexx Foods 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.