Correlation Between Pennant and China Evergrande
Can any of the company-specific risk be diversified away by investing in both Pennant and China Evergrande 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 China Evergrande into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pennant Group and China Evergrande New, you can compare the effects of market volatilities on Pennant and China Evergrande 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 China Evergrande. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pennant and China Evergrande.
Diversification Opportunities for Pennant and China Evergrande
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pennant and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and China Evergrande New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Evergrande New 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 China Evergrande. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Evergrande New has no effect on the direction of Pennant i.e., Pennant and China Evergrande go up and down completely randomly.
Pair Corralation between Pennant and China Evergrande
Given the investment horizon of 90 days Pennant is expected to generate 25.53 times less return on investment than China Evergrande. But when comparing it to its historical volatility, Pennant Group is 26.81 times less risky than China Evergrande. It trades about 0.22 of its potential returns per unit of risk. China Evergrande New is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.40 in China Evergrande New on January 11, 2025 and sell it today you would earn a total of 1.10 from holding China Evergrande New or generate 275.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pennant Group vs. China Evergrande New
Performance |
| Timeline |
| Pennant Group |
| China Evergrande New |
Pennant and China Evergrande Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pennant and China Evergrande
The main advantage of trading using opposite Pennant and China Evergrande positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pennant position performs unexpectedly, China Evergrande 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 China Evergrande will offset losses from the drop in China Evergrande's long position.| Pennant vs. Encompass Health Corp | Pennant vs. Acadia Healthcare | Pennant vs. Select Medical Holdings | Pennant vs. Addus HomeCare |
| China Evergrande vs. Fresenius Medical Care | China Evergrande vs. Universal Health Services | China Evergrande vs. Addus HomeCare | China Evergrande vs. HCA Holdings |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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