Correlation Between Cencora and NeueHealth

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

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

Diversification Opportunities for Cencora and NeueHealth

-0.27

Correlation Coefficient

Cencora  NeueHealth

Very good diversification

The 3 months correlation between Cencora and NeueHealth is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cencora and NeueHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeueHealth and Cencora 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 Cencora are associated (or correlated) with NeueHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeueHealth has no effect on the direction of Cencora i.e., Cencora and NeueHealth go up and down completely randomly.

Pair Corralation between Cencora and NeueHealth

Considering the 90-day investment horizon Cencora is expected to generate 0.26 times more return on investment than NeueHealth. However, Cencora is 3.8 times less risky than NeueHealth. It trades about 0.3 of its potential returns per unit of risk. NeueHealth is currently generating about -0.01 per unit of risk. If you would invest  22,420  in Cencora on December 30, 2024 and sell it today you would earn a total of  5,101  from holding Cencora or generate 22.75% return on investment over 90 days.

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

Cencora  vs.  NeueHealth

Cencora

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cencora are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Cencora reported solid returns over the last few months and may actually be approaching a breakup point.

NeueHealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeueHealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NeueHealth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cencora and NeueHealth

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

The idea behind Cencora and NeueHealth 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.