Correlation Between ModivCare and Pennant
Can any of the company-specific risk be diversified away by investing in both ModivCare 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 ModivCare and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ModivCare and Pennant Group, you can compare the effects of market volatilities on ModivCare 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 ModivCare with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of ModivCare and Pennant.
Diversification Opportunities for ModivCare and Pennant
Poor diversification
The 3 months correlation between ModivCare and Pennant is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ModivCare and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and ModivCare 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 ModivCare 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 ModivCare i.e., ModivCare and Pennant go up and down completely randomly.
Pair Corralation between ModivCare and Pennant
Given the investment horizon of 90 days ModivCare is expected to under-perform the Pennant. In addition to that, ModivCare is 4.22 times more volatile than Pennant Group. It trades about -0.2 of its total potential returns per unit of risk. Pennant Group is currently generating about -0.12 per unit of volatility. If you would invest 3,249 in Pennant Group on November 1, 2024 and sell it today you would lose (501.00) from holding Pennant Group or give up 15.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ModivCare vs. Pennant Group
Performance |
| Timeline |
| ModivCare |
| Pennant Group |
ModivCare and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ModivCare and Pennant
The main advantage of trading using opposite ModivCare and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ModivCare 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.| ModivCare vs. The Ensign Group | ModivCare vs. Select Medical Holdings | ModivCare vs. Encompass Health Corp | ModivCare vs. InnovAge Holding Corp |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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