Correlation Between Amedisys and ModivCare

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

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

Diversification Opportunities for Amedisys and ModivCare

0.04

Correlation Coefficient

Amedisys  ModivCare

Significant diversification

The 3 months correlation between Amedisys and ModivCare is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Amedisys and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare and Amedisys 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 Amedisys are associated (or correlated) with ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Amedisys i.e., Amedisys and ModivCare go up and down completely randomly.

Pair Corralation between Amedisys and ModivCare

Given the investment horizon of 90 days Amedisys is expected to generate 0.22 times more return on investment than ModivCare. However, Amedisys is 4.51 times less risky than ModivCare. It trades about -0.08 of its potential returns per unit of risk. ModivCare is currently generating about -0.04 per unit of risk. If you would invest  9,585  in Amedisys on October 1, 2024 and sell it today you would lose (589.00) from holding Amedisys or give up 6.15% of portfolio value over 90 days.

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

Amedisys  vs.  ModivCare

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Amedisys is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Amedisys and ModivCare

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

The idea behind Amedisys and ModivCare 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.