Correlation Between PennantPark Floating and Ambev SA

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

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

Diversification Opportunities for PennantPark Floating and Ambev SA

0.5

Correlation Coefficient

PennantPark Floating  Ambev SA

Very weak diversification

The 3 months correlation between PennantPark and Ambev is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and PennantPark Floating 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 PennantPark Floating Rate are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Ambev SA go up and down completely randomly.

Pair Corralation between PennantPark Floating and Ambev SA

Given the investment horizon of 90 days PennantPark Floating is expected to generate 3.36 times less return on investment than Ambev SA. But when comparing it to its historical volatility, PennantPark Floating Rate is 2.03 times less risky than Ambev SA. It trades about 0.12 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Ambev SA ADR on December 29, 2024 and sell it today you would earn a total of  45.00  from holding Ambev SA ADR or generate 24.59% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  Ambev SA ADR

PennantPark Floating Rate

Risk-Adjusted Performance

Good

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.

Ambev SA ADR

Risk-Adjusted Performance

Solid

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

Pair Trading with PennantPark Floating and Ambev SA

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

The idea behind PennantPark Floating Rate and Ambev SA ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.