Correlation Between PennantPark Floating and American Express

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

Diversification Opportunities for PennantPark Floating and American Express

-0.4

Correlation Coefficient

PennantPark Floating  American Express

Very good diversification

The 3 months correlation between PennantPark and American is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and American Express go up and down completely randomly.

Pair Corralation between PennantPark Floating and American Express

Given the investment horizon of 90 days PennantPark Floating Rate is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, PennantPark Floating Rate is 1.88 times less risky than American Express. The stock trades about -0.02 of its potential returns per unit of risk. The American Express is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  25,449  in American Express on September 12, 2024 and sell it today you would earn a total of  4,762  from holding American Express or generate 18.71% return on investment over 90 days.

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

PennantPark Floating Rate  vs.  American Express

PennantPark Floating Rate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennantPark Floating Rate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, PennantPark Floating is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

American Express

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and American Express

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

The idea behind PennantPark Floating Rate and American Express 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.