Correlation Between Pennant and Amedisys

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

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

Diversification Opportunities for Pennant and Amedisys

0.87

Correlation Coefficient

Pennant  Amedisys

Very poor diversification

The 3 months correlation between Pennant and Amedisys is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys and Pennant 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 Pennant Group are associated (or correlated) with Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Pennant i.e., Pennant and Amedisys go up and down completely randomly.

Pair Corralation between Pennant and Amedisys

Given the investment horizon of 90 days Pennant Group is expected to under-perform the Amedisys. In addition to that, Pennant is 1.34 times more volatile than Amedisys. It trades about -0.29 of its total potential returns per unit of risk. Amedisys is currently generating about -0.27 per unit of volatility. If you would invest  9,097  in Amedisys on September 24, 2024 and sell it today you would lose (650.00) from holding Amedisys or give up 7.15% of portfolio value over 90 days.

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

Pennant Group  vs.  Amedisys

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pennant and Amedisys

The main advantage of trading using opposite Pennant and Amedisys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pennant position performs unexpectedly, Amedisys 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 Amedisys will offset losses from the drop in Amedisys' long position.

The idea behind Pennant Group and Amedisys 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.