Correlation Between Elevance Health and Pennant

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

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

Diversification Opportunities for Elevance Health and Pennant

0.54

Correlation Coefficient

Elevance Health  Pennant

Very weak diversification

The 3 months correlation between Elevance and Pennant is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Elevance Health 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 Elevance Health 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 Elevance Health i.e., Elevance Health and Pennant go up and down completely randomly.

Pair Corralation between Elevance Health and Pennant

Considering the 90-day investment horizon Elevance Health is expected to under-perform the Pennant. But the stock apears to be less risky and, when comparing its historical volatility, Elevance Health is 1.35 times less risky than Pennant. The stock trades about -0.25 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  3,249  in Pennant Group on September 2, 2024 and sell it today you would lose (131.00) from holding Pennant Group or give up 4.03% of portfolio value over 90 days.

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

Elevance Health  vs.  Pennant Group

Elevance Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elevance Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 nearly stable basic indicators, Pennant is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Elevance Health and Pennant

The main advantage of trading using opposite Elevance Health and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elevance Health 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 Elevance Health 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.