Correlation Between Pennant and Amedisys
Can any of the company-specific risk be diversified away by investing in both Pennant and Amedisys 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 Pennant and Amedisys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pennant Group and Amedisys, you can compare the effects of market volatilities on Pennant and Amedisys 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 Pennant with a short position of Amedisys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pennant and Amedisys.
Diversification Opportunities for Pennant and Amedisys
Very weak diversification
The 3 months correlation between Pennant and Amedisys is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys and Pennant 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 Pennant Group are associated (or correlated) with Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Pennant i.e., Pennant and Amedisys go up and down completely randomly.
Pair Corralation between Pennant and Amedisys
Given the investment horizon of 90 days Pennant Group is expected to generate 3.24 times more return on investment than Amedisys. However, Pennant is 3.24 times more volatile than Amedisys. It trades about 0.15 of its potential returns per unit of risk. Amedisys is currently generating about -0.02 per unit of risk. If you would invest 1,501 in Pennant Group on August 28, 2024 and sell it today you would earn a total of 1,555 from holding Pennant Group or generate 103.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pennant Group vs. Amedisys
Performance |
| Timeline |
| Pennant Group |
| Amedisys |
Pennant and Amedisys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pennant and Amedisys
The main advantage of trading using opposite Pennant and Amedisys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pennant position performs unexpectedly, Amedisys 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 Amedisys will offset losses from the drop in Amedisys' long position.| Pennant vs. Encompass Health Corp | Pennant vs. Acadia Healthcare | Pennant vs. Select Medical Holdings | Pennant vs. Addus HomeCare |
| Amedisys vs. Acadia Healthcare | Amedisys vs. Addus HomeCare | Amedisys vs. Encompass Health Corp | Amedisys vs. The Ensign Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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