Correlation Between Pennant and Option Care

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

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

Diversification Opportunities for Pennant and Option Care

-0.56

Correlation Coefficient

Pennant  Option Care

Excellent diversification

The 3 months correlation between Pennant and Option is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of Pennant i.e., Pennant and Option Care go up and down completely randomly.

Pair Corralation between Pennant and Option Care

Given the investment horizon of 90 days Pennant Group is expected to under-perform the Option Care. But the stock apears to be less risky and, when comparing its historical volatility, Pennant Group is 1.17 times less risky than Option Care. The stock trades about -0.15 of its potential returns per unit of risk. The Option Care Health is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,380  in Option Care Health on November 28, 2024 and sell it today you would earn a total of  925.50  from holding Option Care Health or generate 38.89% return on investment over 90 days.

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

Pennant Group  vs.  Option Care Health

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.

Option Care Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Option Care Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Option Care demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pennant and Option Care

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

The idea behind Pennant Group and Option Care Health 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.