Correlation Between Central Garden and AMN Healthcare

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

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

Diversification Opportunities for Central Garden and AMN Healthcare

-0.62

Correlation Coefficient

Central Garden  AMN Healthcare

Excellent diversification

The 3 months correlation between Central and AMN is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and AMN Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMN Healthcare Services and Central Garden 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 Central Garden Pet are associated (or correlated) with AMN Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMN Healthcare Services has no effect on the direction of Central Garden i.e., Central Garden and AMN Healthcare go up and down completely randomly.

Pair Corralation between Central Garden and AMN Healthcare

Assuming the 90 days horizon Central Garden Pet is expected to under-perform the AMN Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 1.37 times less risky than AMN Healthcare. The stock trades about -0.33 of its potential returns per unit of risk. The AMN Healthcare Services is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,295  in AMN Healthcare Services on October 20, 2024 and sell it today you would earn a total of  294.00  from holding AMN Healthcare Services or generate 12.81% return on investment over 90 days.

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

Central Garden Pet  vs.  AMN Healthcare Services

Central Garden Pet

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Central Garden and AMN Healthcare

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

The idea behind Central Garden Pet and AMN Healthcare Services 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.