Correlation Between Pennant and Oncology Institute

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

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

Diversification Opportunities for Pennant and Oncology Institute

-0.21

Correlation Coefficient

Pennant  Oncology Institute

Very good diversification

The 3 months correlation between Pennant and Oncology is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Oncology Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncology Institute 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 Oncology Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncology Institute has no effect on the direction of Pennant i.e., Pennant and Oncology Institute go up and down completely randomly.

Pair Corralation between Pennant and Oncology Institute

Given the investment horizon of 90 days Pennant Group is expected to under-perform the Oncology Institute. But the stock apears to be less risky and, when comparing its historical volatility, Pennant Group is 3.53 times less risky than Oncology Institute. The stock trades about -0.01 of its potential returns per unit of risk. The Oncology Institute is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Oncology Institute on December 29, 2024 and sell it today you would earn a total of  79.00  from holding Oncology Institute or generate 246.88% return on investment over 90 days.

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

Pennant Group  vs.  Oncology Institute

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.

Oncology Institute

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oncology Institute are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Oncology Institute demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pennant and Oncology Institute

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

The idea behind Pennant Group and Oncology Institute 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.

Check out your portfolio center.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.