Correlation Between Biote Corp and Encompass Health

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

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

Diversification Opportunities for Biote Corp and Encompass Health

-0.49

Correlation Coefficient

Biote Corp  Encompass Health

Very good diversification

The 3 months correlation between Biote and Encompass is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding biote Corp and Encompass Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Health Corp and Biote Corp 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 biote Corp are associated (or correlated) with Encompass Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Health Corp has no effect on the direction of Biote Corp i.e., Biote Corp and Encompass Health go up and down completely randomly.

Pair Corralation between Biote Corp and Encompass Health

Given the investment horizon of 90 days biote Corp is expected to under-perform the Encompass Health. In addition to that, Biote Corp is 4.24 times more volatile than Encompass Health Corp. It trades about -0.08 of its total potential returns per unit of risk. Encompass Health Corp is currently generating about 0.07 per unit of volatility. If you would invest  9,428  in Encompass Health Corp on December 20, 2024 and sell it today you would earn a total of  488.00  from holding Encompass Health Corp or generate 5.18% return on investment over 90 days.

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

biote Corp  vs.  Encompass Health Corp

biote Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days biote Corp 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Encompass Health Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Encompass Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Biote Corp and Encompass Health

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

The idea behind biote Corp and Encompass Health Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.