Correlation Between Addus HomeCare and Pennant
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare 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 Addus HomeCare and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Pennant Group, you can compare the effects of market volatilities on Addus HomeCare 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 Addus HomeCare with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Pennant.
Diversification Opportunities for Addus HomeCare and Pennant
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Addus and Pennant is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare i.e., Addus HomeCare and Pennant go up and down completely randomly.
Pair Corralation between Addus HomeCare and Pennant
Given the investment horizon of 90 days Addus HomeCare is expected to generate 4.63 times less return on investment than Pennant. But when comparing it to its historical volatility, Addus HomeCare is 1.33 times less risky than Pennant. It trades about 0.03 of its potential returns per unit of risk. Pennant Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,091 in Pennant Group on August 24, 2024 and sell it today you would earn a total of 2,023 from holding Pennant Group or generate 185.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Pennant Group
Performance |
| Timeline |
| Addus HomeCare |
| Pennant Group |
Addus HomeCare and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Pennant
The main advantage of trading using opposite Addus HomeCare and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare 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.| Addus HomeCare vs. Encompass Health Corp | Addus HomeCare vs. Pennant Group | Addus HomeCare vs. Acadia Healthcare | Addus HomeCare vs. Select Medical Holdings |
| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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