Correlation Between Medical Facilities and Pennant
Can any of the company-specific risk be diversified away by investing in both Medical Facilities 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 Medical Facilities and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Facilities and Pennant Group, you can compare the effects of market volatilities on Medical Facilities 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 Medical Facilities with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Facilities and Pennant.
Diversification Opportunities for Medical Facilities and Pennant
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Medical and Pennant is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Medical Facilities 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 Medical Facilities 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 Medical Facilities i.e., Medical Facilities and Pennant go up and down completely randomly.
Pair Corralation between Medical Facilities and Pennant
Assuming the 90 days horizon Medical Facilities is expected to generate 0.77 times more return on investment than Pennant. However, Medical Facilities is 1.29 times less risky than Pennant. It trades about 0.24 of its potential returns per unit of risk. Pennant Group is currently generating about -0.04 per unit of risk. If you would invest 1,043 in Medical Facilities on September 1, 2024 and sell it today you would earn a total of 94.00 from holding Medical Facilities or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medical Facilities vs. Pennant Group
Performance |
| Timeline |
| Medical Facilities |
| Pennant Group |
Medical Facilities and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medical Facilities and Pennant
The main advantage of trading using opposite Medical Facilities and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Facilities 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.| Medical Facilities vs. Jack Nathan Medical | Medical Facilities vs. Fresenius SE Co | Medical Facilities vs. Ramsay Health Care | Medical Facilities vs. Pennant Group |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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