Correlation Between DaVita HealthCare and Regional Health

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

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

Diversification Opportunities for DaVita HealthCare and Regional Health

-0.11

Correlation Coefficient

DaVita HealthCare  Regional Health

Good diversification

The 3 months correlation between DaVita and Regional is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding DaVita HealthCare Partners and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop and DaVita 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 DaVita HealthCare Partners are associated (or correlated) with Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of DaVita HealthCare i.e., DaVita HealthCare and Regional Health go up and down completely randomly.

Pair Corralation between DaVita HealthCare and Regional Health

Considering the 90-day investment horizon DaVita HealthCare Partners is expected to generate 0.3 times more return on investment than Regional Health. However, DaVita HealthCare Partners is 3.37 times less risky than Regional Health. It trades about 0.08 of its potential returns per unit of risk. Regional Health Properties is currently generating about 0.01 per unit of risk. If you would invest  15,198  in DaVita HealthCare Partners on August 31, 2024 and sell it today you would earn a total of  1,365  from holding DaVita HealthCare Partners or generate 8.98% return on investment over 90 days.

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

DaVita HealthCare Partners  vs.  Regional Health Properties

DaVita HealthCare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DaVita HealthCare Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DaVita HealthCare may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Regional Health Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Regional 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 DaVita HealthCare and Regional Health

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

The idea behind DaVita HealthCare Partners and Regional Health Properties 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.