Correlation Between Pennant and Xenetic Biosciences
Can any of the company-specific risk be diversified away by investing in both Pennant and Xenetic Biosciences 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 Xenetic Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pennant Group and Xenetic Biosciences, you can compare the effects of market volatilities on Pennant and Xenetic Biosciences 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 Xenetic Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pennant and Xenetic Biosciences.
Diversification Opportunities for Pennant and Xenetic Biosciences
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pennant and Xenetic is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Xenetic Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenetic Biosciences 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 Xenetic Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenetic Biosciences has no effect on the direction of Pennant i.e., Pennant and Xenetic Biosciences go up and down completely randomly.
Pair Corralation between Pennant and Xenetic Biosciences
Given the investment horizon of 90 days Pennant Group is expected to generate 0.53 times more return on investment than Xenetic Biosciences. However, Pennant Group is 1.87 times less risky than Xenetic Biosciences. It trades about 0.06 of its potential returns per unit of risk. Xenetic Biosciences is currently generating about 0.02 per unit of risk. If you would invest 1,209 in Pennant Group on December 11, 2024 and sell it today you would earn a total of 1,040 from holding Pennant Group or generate 86.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pennant Group vs. Xenetic Biosciences
Performance |
| Timeline |
| Pennant Group |
| Xenetic Biosciences |
Pennant and Xenetic Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pennant and Xenetic Biosciences
The main advantage of trading using opposite Pennant and Xenetic Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pennant position performs unexpectedly, Xenetic Biosciences 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 Xenetic Biosciences will offset losses from the drop in Xenetic Biosciences' long position.| Pennant vs. Encompass Health Corp | ||
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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