Correlation Between Pennant and Aesthetic Medical

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

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

Diversification Opportunities for Pennant and Aesthetic Medical

-0.51

Correlation Coefficient

Pennant  Aesthetic Medical

Excellent diversification

The 3 months correlation between Pennant and Aesthetic is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Aesthetic Medical Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aesthetic Medical Intl 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 Aesthetic Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aesthetic Medical Intl has no effect on the direction of Pennant i.e., Pennant and Aesthetic Medical go up and down completely randomly.

Pair Corralation between Pennant and Aesthetic Medical

Given the investment horizon of 90 days Pennant Group is expected to generate 0.54 times more return on investment than Aesthetic Medical. However, Pennant Group is 1.87 times less risky than Aesthetic Medical. It trades about 0.03 of its potential returns per unit of risk. Aesthetic Medical Intl is currently generating about -0.02 per unit of risk. If you would invest  1,662  in Pennant Group on January 29, 2024 and sell it today you would earn a total of  416.00  from holding Pennant Group or generate 25.03% 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.  Aesthetic Medical Intl

Pennant Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pennant Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Pennant reported solid returns over the last few months and may actually be approaching a breakup point.

Aesthetic Medical Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aesthetic Medical Intl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Aesthetic Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Pennant and Aesthetic Medical

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

The idea behind Pennant Group and Aesthetic Medical Intl 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.