Correlation Between Fresenius and Pennant

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

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

Diversification Opportunities for Fresenius and Pennant

0.75

Correlation Coefficient

Fresenius  Pennant

Poor diversification

The 3 months correlation between Fresenius and Pennant is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and Fresenius 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 Fresenius SE Co 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 Fresenius i.e., Fresenius and Pennant go up and down completely randomly.

Pair Corralation between Fresenius and Pennant

Assuming the 90 days horizon Fresenius SE Co is expected to generate 0.81 times more return on investment than Pennant. However, Fresenius SE Co is 1.23 times less risky than Pennant. It trades about -0.22 of its potential returns per unit of risk. Pennant Group is currently generating about -0.4 per unit of risk. If you would invest  3,466  in Fresenius SE Co on October 6, 2024 and sell it today you would lose (181.00) from holding Fresenius SE Co or give up 5.22% of portfolio value over 90 days.

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

Fresenius SE Co  vs.  Pennant Group

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius SE Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Fresenius and Pennant

The main advantage of trading using opposite Fresenius and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius 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 Fresenius SE Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.