Correlation Between Select Medical and Pennant
Can any of the company-specific risk be diversified away by investing in both Select Medical 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 Select Medical and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Medical Holdings and Pennant Group, you can compare the effects of market volatilities on Select Medical 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 Select Medical with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Pennant.
Diversification Opportunities for Select Medical and Pennant
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and Pennant is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Select Medical 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 Select Medical Holdings 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 Select Medical i.e., Select Medical and Pennant go up and down completely randomly.
Pair Corralation between Select Medical and Pennant
Considering the 90-day investment horizon Select Medical is expected to generate 1.95 times less return on investment than Pennant. But when comparing it to its historical volatility, Select Medical Holdings is 1.36 times less risky than Pennant. It trades about 0.06 of its potential returns per unit of risk. Pennant Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,063 in Pennant Group on August 28, 2024 and sell it today you would earn a total of 1,993 from holding Pennant Group or generate 187.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Medical Holdings vs. Pennant Group
Performance |
| Timeline |
| Select Medical Holdings |
| Pennant Group |
Select Medical and Pennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Medical and Pennant
The main advantage of trading using opposite Select Medical and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Medical 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.| Select Medical vs. The Ensign Group | Select Medical vs. Encompass Health Corp | Select Medical vs. InnovAge Holding Corp | Select Medical vs. Enhabit |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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