Correlation Between Enhabit and Pennant

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

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

Diversification Opportunities for Enhabit and Pennant

-0.25

Correlation Coefficient

Enhabit  Pennant

Very good diversification

The 3 months correlation between Enhabit and Pennant is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Enhabit 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 Enhabit 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 Enhabit i.e., Enhabit and Pennant go up and down completely randomly.

Pair Corralation between Enhabit and Pennant

Given the investment horizon of 90 days Enhabit is expected to generate 0.94 times more return on investment than Pennant. However, Enhabit is 1.06 times less risky than Pennant. It trades about -0.03 of its potential returns per unit of risk. Pennant Group is currently generating about -0.11 per unit of risk. If you would invest  844.00  in Enhabit on November 28, 2024 and sell it today you would lose (20.00) from holding Enhabit or give up 2.37% of portfolio value over 90 days.

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

Enhabit  vs.  Pennant Group

Enhabit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enhabit and Pennant

The main advantage of trading using opposite Enhabit and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhabit 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 Enhabit 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..