Correlation Between Pentagon I and DRI Healthcare

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

By analyzing existing cross correlation between Pentagon I Capital and DRI Healthcare Trust, you can compare the effects of market volatilities on Pentagon I and DRI Healthcare 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 Pentagon I with a short position of DRI Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentagon I and DRI Healthcare.

Diversification Opportunities for Pentagon I and DRI Healthcare

-0.48

Correlation Coefficient

Pentagon I  DRI Healthcare

Very good diversification

The 3 months correlation between Pentagon and DRI is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital and DRI Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRI Healthcare Trust and Pentagon I 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 Pentagon I Capital are associated (or correlated) with DRI Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRI Healthcare Trust has no effect on the direction of Pentagon I i.e., Pentagon I and DRI Healthcare go up and down completely randomly.

Pair Corralation between Pentagon I and DRI Healthcare

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the DRI Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Pentagon I Capital is 1.01 times less risky than DRI Healthcare. The stock trades about -0.05 of its potential returns per unit of risk. The DRI Healthcare Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  883.00  in DRI Healthcare Trust on September 18, 2024 and sell it today you would earn a total of  297.00  from holding DRI Healthcare Trust or generate 33.64% return on investment over 90 days.

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

Pentagon I Capital  vs.  DRI Healthcare Trust

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DRI Healthcare Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DRI Healthcare Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, DRI Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentagon I and DRI Healthcare

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

The idea behind Pentagon I Capital and DRI Healthcare Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.