Correlation Between PennantPark Floating and More Provident

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

Diversification Opportunities for PennantPark Floating and More Provident

0.93

Correlation Coefficient

PennantPark Floating  More Provident

Almost no diversification

The 3 months correlation between PennantPark and More is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and More Provident Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on More Provident Funds 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 More Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of More Provident Funds has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and More Provident go up and down completely randomly.

Pair Corralation between PennantPark Floating and More Provident

Assuming the 90 days trading horizon PennantPark Floating Rate is expected to generate 3.03 times more return on investment than More Provident. However, PennantPark Floating is 3.03 times more volatile than More Provident Funds. It trades about 0.21 of its potential returns per unit of risk. More Provident Funds is currently generating about 0.5 per unit of risk. If you would invest  2,375  in PennantPark Floating Rate on September 16, 2024 and sell it today you would earn a total of  1,798  from holding PennantPark Floating Rate or generate 75.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.87%
Values	Daily Returns

PennantPark Floating Rate  vs.  More Provident Funds

PennantPark Floating Rate

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PennantPark Floating sustained solid returns over the last few months and may actually be approaching a breakup point.

More Provident Funds

Risk-Adjusted Performance

39 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in More Provident Funds are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, More Provident sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and More Provident

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

The idea behind PennantPark Floating Rate and More Provident Funds 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.