Correlation Between American Shared and Pennant

Can any of the company-specific risk be diversified away by investing in both American Shared 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 American Shared and Pennant into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Shared Hospital and Pennant Group, you can compare the effects of market volatilities on American Shared 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 American Shared with a short position of Pennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Shared and Pennant.

Diversification Opportunities for American Shared and Pennant

-0.5

Correlation Coefficient

American Shared  Pennant

Very good diversification

The 3 months correlation between American and Pennant is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Shared Hospital and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and American Shared 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 American Shared Hospital 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 American Shared i.e., American Shared and Pennant go up and down completely randomly.

Pair Corralation between American Shared and Pennant

Considering the 90-day investment horizon American Shared Hospital is expected to generate 1.07 times more return on investment than Pennant. However, American Shared is 1.07 times more volatile than Pennant Group. It trades about 0.04 of its potential returns per unit of risk. Pennant Group is currently generating about -0.16 per unit of risk. If you would invest  305.00  in American Shared Hospital on September 21, 2024 and sell it today you would earn a total of  17.00  from holding American Shared Hospital or generate 5.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

American Shared Hospital  vs.  Pennant Group

American Shared Hospital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Shared Hospital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating primary indicators, American Shared may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pennant Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pennant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Shared and Pennant

The main advantage of trading using opposite American Shared and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shared 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.

The idea behind American Shared Hospital and Pennant Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.