Correlation Between Concord Medical and Select Medical

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

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

Diversification Opportunities for Concord Medical and Select Medical

-0.68

Correlation Coefficient

Concord Medical  Select Medical

Excellent diversification

The 3 months correlation between Concord and Select is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Concord Medical Services and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings and Concord Medical 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 Concord Medical Services are associated (or correlated) with Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of Concord Medical i.e., Concord Medical and Select Medical go up and down completely randomly.

Pair Corralation between Concord Medical and Select Medical

Considering the 90-day investment horizon Concord Medical Services is expected to under-perform the Select Medical. In addition to that, Concord Medical is 2.59 times more volatile than Select Medical Holdings. It trades about -0.02 of its total potential returns per unit of risk. Select Medical Holdings is currently generating about 0.09 per unit of volatility. If you would invest  1,888  in Select Medical Holdings on September 2, 2024 and sell it today you would earn a total of  223.00  from holding Select Medical Holdings or generate 11.81% return on investment over 90 days.

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

Concord Medical Services  vs.  Select Medical Holdings

Concord Medical Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concord Medical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Select Medical Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Select Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Concord Medical and Select Medical

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

The idea behind Concord Medical Services and Select Medical Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.