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

0.86

Correlation Coefficient

American Shared  Pennant

Very poor diversification

The 3 months correlation between American and Pennant is 0.86. 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 under-perform the Pennant. But the stock apears to be less risky and, when comparing its historical volatility, American Shared Hospital is 1.51 times less risky than Pennant. The stock trades about -0.09 of its potential returns per unit of risk. The Pennant Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,622  in Pennant Group on December 29, 2024 and sell it today you would lose (80.00) from holding Pennant Group or give up 3.05% of portfolio value over 90 days.

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

American Shared Hospital  vs.  Pennant Group

American Shared Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Shared Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pennant Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pennant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pennant is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.