Correlation Between Pennant and Chemed Corp
Can any of the company-specific risk be diversified away by investing in both Pennant and Chemed Corp 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 Chemed Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pennant Group and Chemed Corp, you can compare the effects of market volatilities on Pennant and Chemed Corp 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 Chemed Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pennant and Chemed Corp.
Diversification Opportunities for Pennant and Chemed Corp
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pennant and Chemed is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Chemed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed Corp 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 Chemed Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemed Corp has no effect on the direction of Pennant i.e., Pennant and Chemed Corp go up and down completely randomly.
Pair Corralation between Pennant and Chemed Corp
Given the investment horizon of 90 days Pennant Group is expected to generate 1.9 times more return on investment than Chemed Corp. However, Pennant is 1.9 times more volatile than Chemed Corp. It trades about 0.08 of its potential returns per unit of risk. Chemed Corp is currently generating about -0.22 per unit of risk. If you would invest 2,835 in Pennant Group on March 27, 2025 and sell it today you would earn a total of 74.00 from holding Pennant Group or generate 2.61% 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. Chemed Corp
Performance |
| Timeline |
| Pennant Group |
| Chemed Corp |
Pennant and Chemed Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pennant and Chemed Corp
The main advantage of trading using opposite Pennant and Chemed Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pennant position performs unexpectedly, Chemed Corp 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 Chemed Corp will offset losses from the drop in Chemed Corp's long position.The idea behind Pennant Group and Chemed Corp 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.| Chemed Corp vs. Encompass Health Corp | Chemed Corp vs. Pennant Group | Chemed Corp vs. Acadia Healthcare | Chemed Corp vs. Select Medical Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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