Correlation Between AMN Healthcare and Regional Health

Can any of the company-specific risk be diversified away by investing in both AMN Healthcare and Regional Health 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 Regional Health 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 Regional Health Properties, you can compare the effects of market volatilities on AMN Healthcare and Regional Health 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 Regional Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMN Healthcare and Regional Health.

Diversification Opportunities for AMN Healthcare and Regional Health

-0.14

Correlation Coefficient

AMN Healthcare  Regional Health

Good diversification

The 3 months correlation between AMN and Regional is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding AMN Healthcare Services and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of AMN Healthcare i.e., AMN Healthcare and Regional Health go up and down completely randomly.

Pair Corralation between AMN Healthcare and Regional Health

Considering the 90-day investment horizon AMN Healthcare is expected to generate 191.83 times less return on investment than Regional Health. But when comparing it to its historical volatility, AMN Healthcare Services is 9.49 times less risky than Regional Health. It trades about 0.01 of its potential returns per unit of risk. Regional Health Properties is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  155.00  in Regional Health Properties on December 27, 2024 and sell it today you would earn a total of  77.00  from holding Regional Health Properties or generate 49.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.62%
Values	Daily Returns

AMN Healthcare Services  vs.  Regional Health Properties

AMN Healthcare Services

Risk-Adjusted Performance

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 very healthy primary indicators, AMN Healthcare is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Regional Health Prop

Risk-Adjusted Performance

Good

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMN Healthcare and Regional Health

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

The idea behind AMN Healthcare Services and Regional Health Properties 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.