Correlation Between Definitive Healthcare and Mednax

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

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

Diversification Opportunities for Definitive Healthcare and Mednax

-0.19

Correlation Coefficient

Definitive Healthcare  Mednax

Good diversification

The 3 months correlation between Definitive and Mednax is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and Mednax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mednax Inc and Definitive 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 Definitive Healthcare Corp are associated (or correlated) with Mednax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mednax Inc has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and Mednax go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Mednax

Allowing for the 90-day total investment horizon Definitive Healthcare is expected to generate 8.43 times less return on investment than Mednax. But when comparing it to its historical volatility, Definitive Healthcare Corp is 1.36 times less risky than Mednax. It trades about 0.03 of its potential returns per unit of risk. Mednax Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,066  in Mednax Inc on September 3, 2024 and sell it today you would earn a total of  435.00  from holding Mednax Inc or generate 40.81% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  Mednax Inc

Definitive Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Mednax Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mednax Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Mednax exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Definitive Healthcare and Mednax

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

The idea behind Definitive Healthcare Corp and Mednax Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.