Correlation Between PennantPark Floating and Fomento Economico

Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and Fomento Economico 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 Fomento Economico 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 Fomento Economico Mexicano, you can compare the effects of market volatilities on PennantPark Floating and Fomento Economico 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 Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and Fomento Economico.

Diversification Opportunities for PennantPark Floating and Fomento Economico

0.56

Correlation Coefficient

PennantPark Floating  Fomento Economico

Very weak diversification

The 3 months correlation between PennantPark and Fomento is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico 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 Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Fomento Economico go up and down completely randomly.

Pair Corralation between PennantPark Floating and Fomento Economico

Given the investment horizon of 90 days PennantPark Floating is expected to generate 1.79 times less return on investment than Fomento Economico. But when comparing it to its historical volatility, PennantPark Floating Rate is 1.9 times less risky than Fomento Economico. It trades about 0.15 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,633  in Fomento Economico Mexicano on December 27, 2024 and sell it today you would earn a total of  1,288  from holding Fomento Economico Mexicano or generate 14.92% 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.  Fomento Economico Mexicano

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 11 (%) 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.

Fomento Economico

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Economico Mexicano are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Fomento Economico showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and Fomento Economico

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

The idea behind PennantPark Floating Rate and Fomento Economico Mexicano 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.