Correlation Between Pennant and Biomerica

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

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

Diversification Opportunities for Pennant and Biomerica

-0.87

Correlation Coefficient

Pennant  Biomerica

Pay attention - limited upside

The 3 months correlation between Pennant and Biomerica is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pennant Group and Biomerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomerica 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 Biomerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomerica has no effect on the direction of Pennant i.e., Pennant and Biomerica go up and down completely randomly.

Pair Corralation between Pennant and Biomerica

Given the investment horizon of 90 days Pennant Group is expected to generate 0.38 times more return on investment than Biomerica. However, Pennant Group is 2.64 times less risky than Biomerica. It trades about 0.24 of its potential returns per unit of risk. Biomerica is currently generating about -0.01 per unit of risk. If you would invest  2,078  in Pennant Group on February 26, 2024 and sell it today you would earn a total of  271.00  from holding Pennant Group or generate 13.04% return on investment over 90 days.

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

Pennant Group  vs.  Biomerica

Pennant Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pennant Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Pennant reported solid returns over the last few months and may actually be approaching a breakup point.

Biomerica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomerica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pennant and Biomerica

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

The idea behind Pennant Group and Biomerica 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.