Correlation Between AMN Healthcare and CareRx

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

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

Diversification Opportunities for AMN Healthcare and CareRx

0.77

Correlation Coefficient

AMN Healthcare  CareRx

Poor diversification

The 3 months correlation between AMN and CareRx is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AMN Healthcare Services and CareRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx and AMN Healthcare 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 AMN Healthcare Services are associated (or correlated) with CareRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx has no effect on the direction of AMN Healthcare i.e., AMN Healthcare and CareRx go up and down completely randomly.

Pair Corralation between AMN Healthcare and CareRx

Considering the 90-day investment horizon AMN Healthcare Services is expected to under-perform the CareRx. In addition to that, AMN Healthcare is 1.45 times more volatile than CareRx. It trades about -0.07 of its total potential returns per unit of risk. CareRx is currently generating about 0.22 per unit of volatility. If you would invest  128.00  in CareRx on October 6, 2024 and sell it today you would earn a total of  12.00  from holding CareRx or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

AMN Healthcare Services  vs.  CareRx

AMN Healthcare Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMN Healthcare Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CareRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AMN Healthcare and CareRx

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

The idea behind AMN Healthcare Services and CareRx 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.