Correlation Between Amedisys and Option Care

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

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

Diversification Opportunities for Amedisys and Option Care

0.59

Correlation Coefficient

Amedisys  Option Care

Very weak diversification

The 3 months correlation between Amedisys and Option is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amedisys and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of Amedisys i.e., Amedisys and Option Care go up and down completely randomly.

Pair Corralation between Amedisys and Option Care

Given the investment horizon of 90 days Amedisys is expected to under-perform the Option Care. But the stock apears to be less risky and, when comparing its historical volatility, Amedisys is 1.8 times less risky than Option Care. The stock trades about 0.0 of its potential returns per unit of risk. The Option Care Health is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,918  in Option Care Health on October 23, 2024 and sell it today you would lose (2.00) from holding Option Care Health or give up 0.07% of portfolio value over 90 days.

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

Amedisys  vs.  Option Care Health

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.

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Amedisys and Option Care

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

The idea behind Amedisys and Option Care Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.