Correlation Between Pennant and US Physicalrapy

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

By analyzing existing cross correlation between Pennant Group and US Physicalrapy, you can compare the effects of market volatilities on Pennant and US Physicalrapy 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 US Physicalrapy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pennant and US Physicalrapy.

Diversification Opportunities for Pennant and US Physicalrapy

-0.66

Correlation Coefficient

Pennant  US Physicalrapy

Excellent diversification

The 3 months correlation between Pennant and USPH is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy 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 US Physicalrapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physicalrapy has no effect on the direction of Pennant i.e., Pennant and US Physicalrapy go up and down completely randomly.

Pair Corralation between Pennant and US Physicalrapy

Given the investment horizon of 90 days Pennant Group is expected to generate 1.06 times more return on investment than US Physicalrapy. However, Pennant is 1.06 times more volatile than US Physicalrapy. It trades about 0.09 of its potential returns per unit of risk. US Physicalrapy is currently generating about 0.0 per unit of risk. If you would invest  2,285  in Pennant Group on September 15, 2024 and sell it today you would earn a total of  626.00  from holding Pennant Group or generate 27.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pennant Group  vs.  US Physicalrapy

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 unsteady 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.

US Physicalrapy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Physicalrapy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, US Physicalrapy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pennant and US Physicalrapy

The main advantage of trading using opposite Pennant and US Physicalrapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pennant position performs unexpectedly, US Physicalrapy 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 US Physicalrapy will offset losses from the drop in US Physicalrapy's long position.

The idea behind Pennant Group and US Physicalrapy 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.