Correlation Between Life Healthcare and Pennant
Can any of the company-specific risk be diversified away by investing in both Life 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 Life Healthcare and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare Group and Pennant Group, you can compare the effects of market volatilities on Life 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 Life Healthcare with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Pennant.
Diversification Opportunities for Life Healthcare and Pennant
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Life and Pennant is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare Group and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Life 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 Life Healthcare Group 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 Life Healthcare i.e., Life Healthcare and Pennant go up and down completely randomly.
Pair Corralation between Life Healthcare and Pennant
Assuming the 90 days horizon Life Healthcare Group is expected to generate 1.47 times more return on investment than Pennant. However, Life Healthcare is 1.47 times more volatile than Pennant Group. It trades about 0.17 of its potential returns per unit of risk. Pennant Group is currently generating about -0.29 per unit of risk. If you would invest 369.00 in Life Healthcare Group on September 13, 2024 and sell it today you would earn a total of 35.00 from holding Life Healthcare Group or generate 9.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Healthcare Group vs. Pennant Group
Performance |
| Timeline |
| Life Healthcare Group |
| Pennant Group |
Life Healthcare and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Pennant
The main advantage of trading using opposite Life Healthcare and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life 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.| Life Healthcare vs. Fresenius SE Co | Life Healthcare vs. Select Medical Holdings | Life Healthcare vs. Ramsay Health Care | Life Healthcare vs. Jack Nathan Medical |
| 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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