Correlation Between Pennant and Jack Nathan

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

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

Diversification Opportunities for Pennant and Jack Nathan

0.09

Correlation Coefficient

Pennant  Jack Nathan

Significant diversification

The 3 months correlation between Pennant and Jack is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Jack Nathan Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jack Nathan Medical 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 Jack Nathan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jack Nathan Medical has no effect on the direction of Pennant i.e., Pennant and Jack Nathan go up and down completely randomly.

Pair Corralation between Pennant and Jack Nathan

Given the investment horizon of 90 days Pennant Group is expected to under-perform the Jack Nathan. But the stock apears to be less risky and, when comparing its historical volatility, Pennant Group is 15.71 times less risky than Jack Nathan. The stock trades about -0.13 of its potential returns per unit of risk. The Jack Nathan Medical is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3.30  in Jack Nathan Medical on November 20, 2024 and sell it today you would lose (0.70) from holding Jack Nathan Medical or give up 21.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Pennant Group  vs.  Jack Nathan Medical

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Jack Nathan Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jack Nathan Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Jack Nathan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pennant and Jack Nathan

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

The idea behind Pennant Group and Jack Nathan Medical 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.