Correlation Between Amedisys and Pennant

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

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

Diversification Opportunities for Amedisys and Pennant

0.69

Correlation Coefficient

Amedisys  Pennant

Poor diversification

The 3 months correlation between Amedisys and Pennant is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amedisys and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Amedisys 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 Amedisys 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 Amedisys i.e., Amedisys and Pennant go up and down completely randomly.

Pair Corralation between Amedisys and Pennant

Given the investment horizon of 90 days Amedisys is expected to generate 0.59 times more return on investment than Pennant. However, Amedisys is 1.69 times less risky than Pennant. It trades about 0.33 of its potential returns per unit of risk. Pennant Group is currently generating about -0.38 per unit of risk. If you would invest  8,553  in Amedisys on October 12, 2024 and sell it today you would earn a total of  663.00  from holding Amedisys or generate 7.75% return on investment over 90 days.

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

Amedisys  vs.  Pennant Group

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Amedisys is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Amedisys and Pennant

The main advantage of trading using opposite Amedisys and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amedisys 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 Amedisys 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.