Correlation Between Pennant and NRX Pharmaceuticals

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

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

Diversification Opportunities for Pennant and NRX Pharmaceuticals

-0.57

Correlation Coefficient

Pennant  NRX Pharmaceuticals

Excellent diversification

The 3 months correlation between Pennant and NRX is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and NRX Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRX Pharmaceuticals 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 NRX Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRX Pharmaceuticals has no effect on the direction of Pennant i.e., Pennant and NRX Pharmaceuticals go up and down completely randomly.

Pair Corralation between Pennant and NRX Pharmaceuticals

Given the investment horizon of 90 days Pennant Group is expected to generate 0.63 times more return on investment than NRX Pharmaceuticals. However, Pennant Group is 1.59 times less risky than NRX Pharmaceuticals. It trades about -0.23 of its potential returns per unit of risk. NRX Pharmaceuticals is currently generating about -0.27 per unit of risk. If you would invest  2,662  in Pennant Group on December 3, 2024 and sell it today you would lose (409.00) from holding Pennant Group or give up 15.36% of portfolio value over 90 days.

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

Pennant Group  vs.  NRX Pharmaceuticals

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

NRX Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NRX Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NRX Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pennant and NRX Pharmaceuticals

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

The idea behind Pennant Group and NRX Pharmaceuticals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.