Correlation Between Pennexx Foods and Fernhill Corp

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

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

Diversification Opportunities for Pennexx Foods and Fernhill Corp

0.2

Correlation Coefficient

Pennexx Foods  Fernhill Corp

Modest diversification

The 3 months correlation between Pennexx and Fernhill is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pennexx Foods and Fernhill Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fernhill Corp and Pennexx Foods 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 Pennexx Foods are associated (or correlated) with Fernhill Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fernhill Corp has no effect on the direction of Pennexx Foods i.e., Pennexx Foods and Fernhill Corp go up and down completely randomly.

Pair Corralation between Pennexx Foods and Fernhill Corp

Given the investment horizon of 90 days Pennexx Foods is expected to generate 2.0 times less return on investment than Fernhill Corp. But when comparing it to its historical volatility, Pennexx Foods is 1.12 times less risky than Fernhill Corp. It trades about 0.0 of its potential returns per unit of risk. Fernhill Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.41  in Fernhill Corp on October 11, 2024 and sell it today you would lose (0.32) from holding Fernhill Corp or give up 78.05% of portfolio value over 90 days.

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

Pennexx Foods  vs.  Fernhill Corp

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 fairly strong basic indicators, Pennexx Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fernhill Corp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fernhill Corp are ranked lower than 4 (%) 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.

Pair Trading with Pennexx Foods and Fernhill Corp

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

The idea behind Pennexx Foods and Fernhill Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.