Correlation Between National HealthCare and Pennant

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

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

Diversification Opportunities for National HealthCare and Pennant

0.65

Correlation Coefficient

National HealthCare  Pennant

Poor diversification

The 3 months correlation between National and Pennant is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding National HealthCare and Pennant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pennant Group and National HealthCare 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 National HealthCare 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 National HealthCare i.e., National HealthCare and Pennant go up and down completely randomly.

Pair Corralation between National HealthCare and Pennant

Considering the 90-day investment horizon National HealthCare is expected to under-perform the Pennant. But the stock apears to be less risky and, when comparing its historical volatility, National HealthCare is 1.61 times less risky than Pennant. The stock trades about -0.13 of its potential returns per unit of risk. The Pennant Group is currently generating about -0.02 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 (161.00) from holding Pennant Group or give up 6.14% of portfolio value over 90 days.

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

National HealthCare  vs.  Pennant Group

National HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days National HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 National HealthCare and Pennant

The main advantage of trading using opposite National HealthCare and Pennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National HealthCare 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 National HealthCare 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 Valuation module to check real value of public entities based on technical and fundamental data.