Correlation Between Federated Premier and PennantPark Floating

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

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

Diversification Opportunities for Federated Premier and PennantPark Floating

0.49

Correlation Coefficient

Federated Premier  PennantPark Floating

Very weak diversification

The 3 months correlation between Federated and PennantPark is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal 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 Federated Premier 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 Federated Premier Municipal 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 Federated Premier i.e., Federated Premier and PennantPark Floating go up and down completely randomly.

Pair Corralation between Federated Premier and PennantPark Floating

Considering the 90-day investment horizon Federated Premier is expected to generate 12.14 times less return on investment than PennantPark Floating. But when comparing it to its historical volatility, Federated Premier Municipal is 1.58 times less risky than PennantPark Floating. It trades about 0.02 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,056  in PennantPark Floating Rate on December 30, 2024 and sell it today you would earn a total of  72.00  from holding PennantPark Floating Rate or generate 6.82% return on investment over 90 days.

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

Federated Premier Municipal  vs.  PennantPark Floating Rate

Federated Premier

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Premier Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PennantPark Floating Rate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, PennantPark Floating may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Federated Premier and PennantPark Floating

The main advantage of trading using opposite Federated Premier and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Premier 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 Federated Premier Municipal 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.