Correlation Between Pennant and Fresenius

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

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

Diversification Opportunities for Pennant and Fresenius

-0.73

Correlation Coefficient

Pennant  Fresenius

Pay attention - limited upside

The 3 months correlation between Pennant and Fresenius is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Pennant i.e., Pennant and Fresenius go up and down completely randomly.

Pair Corralation between Pennant and Fresenius

Given the investment horizon of 90 days Pennant Group is expected to under-perform the Fresenius. In addition to that, Pennant is 1.73 times more volatile than Fresenius SE Co. It trades about -0.02 of its total potential returns per unit of risk. Fresenius SE Co is currently generating about 0.24 per unit of volatility. If you would invest  870.00  in Fresenius SE Co on December 30, 2024 and sell it today you would earn a total of  216.00  from holding Fresenius SE Co or generate 24.83% return on investment over 90 days.

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

Pennant Group  vs.  Fresenius SE Co

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.

Fresenius SE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius SE Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Fresenius showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pennant and Fresenius

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

The idea behind Pennant Group and Fresenius SE Co 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.