Correlation Between Acadia Healthcare and Pennant
Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and Pennant 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 Acadia Healthcare and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Healthcare and Pennant Group, you can compare the effects of market volatilities on Acadia Healthcare and Pennant 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 Acadia Healthcare with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Pennant.
Diversification Opportunities for Acadia Healthcare and Pennant
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Acadia and Pennant is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with Pennant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pennant Group has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Pennant go up and down completely randomly.
Pair Corralation between Acadia Healthcare and Pennant
Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the Pennant. In addition to that, Acadia Healthcare is 1.87 times more volatile than Pennant Group. It trades about -0.26 of its total potential returns per unit of risk. Pennant Group is currently generating about -0.21 per unit of volatility. If you would invest 3,415 in Pennant Group on August 24, 2024 and sell it today you would lose (365.00) from holding Pennant Group or give up 10.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acadia Healthcare vs. Pennant Group
Performance |
| Timeline |
| Acadia Healthcare |
| Pennant Group |
Acadia Healthcare and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acadia Healthcare and Pennant
The main advantage of trading using opposite Acadia Healthcare and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare position performs unexpectedly, Pennant 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 Pennant will offset losses from the drop in Pennant's long position.| Acadia Healthcare vs. Encompass Health Corp | Acadia Healthcare vs. Pennant Group | Acadia Healthcare vs. Select Medical Holdings | Acadia Healthcare vs. Addus HomeCare |
| Pennant vs. Addus HomeCare | Pennant vs. Morningstar Unconstrained Allocation | Pennant vs. SEI Investments | Pennant vs. Goosehead Insurance |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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