Correlation Between Brookdale Senior and Pennant
Can any of the company-specific risk be diversified away by investing in both Brookdale Senior 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 Brookdale Senior and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookdale Senior Living and Pennant Group, you can compare the effects of market volatilities on Brookdale Senior 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 Brookdale Senior with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookdale Senior and Pennant.
Diversification Opportunities for Brookdale Senior and Pennant
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookdale and Pennant is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Brookdale Senior 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 Brookdale Senior Living 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 Brookdale Senior i.e., Brookdale Senior and Pennant go up and down completely randomly.
Pair Corralation between Brookdale Senior and Pennant
Considering the 90-day investment horizon Brookdale Senior Living is expected to under-perform the Pennant. But the stock apears to be less risky and, when comparing its historical volatility, Brookdale Senior Living is 1.07 times less risky than Pennant. The stock trades about -0.2 of its potential returns per unit of risk. The Pennant Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,646 in Pennant Group on November 3, 2024 and sell it today you would earn a total of 1.00 from holding Pennant Group or generate 0.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Brookdale Senior Living vs. Pennant Group
Performance |
| Timeline |
| Brookdale Senior Living |
| Pennant Group |
Brookdale Senior and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookdale Senior and Pennant
The main advantage of trading using opposite Brookdale Senior and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookdale Senior 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.| Brookdale Senior vs. The Ensign Group | Brookdale Senior vs. Community Health Systems | Brookdale Senior vs. National HealthCare | Brookdale Senior vs. Mednax Inc |
| Pennant vs. Encompass Health Corp | Pennant vs. Acadia Healthcare | Pennant vs. Select Medical Holdings | Pennant vs. Addus HomeCare |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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