Correlation Between DaVita HealthCare and Oncology Institute

Can any of the company-specific risk be diversified away by investing in both DaVita HealthCare and Oncology Institute 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 Oncology Institute 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 Oncology Institute, you can compare the effects of market volatilities on DaVita HealthCare and Oncology Institute 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 Oncology Institute. Check out your portfolio center. Please also check ongoing floating volatility patterns of DaVita HealthCare and Oncology Institute.

Diversification Opportunities for DaVita HealthCare and Oncology Institute

0.45

Correlation Coefficient

DaVita HealthCare  Oncology Institute

Very weak diversification

The 3 months correlation between DaVita and Oncology is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding DaVita HealthCare Partners and Oncology Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncology Institute 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 Oncology Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncology Institute has no effect on the direction of DaVita HealthCare i.e., DaVita HealthCare and Oncology Institute go up and down completely randomly.

Pair Corralation between DaVita HealthCare and Oncology Institute

Considering the 90-day investment horizon DaVita HealthCare Partners is expected to under-perform the Oncology Institute. But the stock apears to be less risky and, when comparing its historical volatility, DaVita HealthCare Partners is 4.31 times less risky than Oncology Institute. The stock trades about -0.11 of its potential returns per unit of risk. The Oncology Institute is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Oncology Institute on November 29, 2024 and sell it today you would earn a total of  80.00  from holding Oncology Institute or generate 500.0% return on investment over 90 days.

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

DaVita HealthCare Partners  vs.  Oncology Institute

DaVita HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days DaVita HealthCare Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Oncology Institute

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Oncology Institute are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Oncology Institute demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DaVita HealthCare and Oncology Institute

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

The idea behind DaVita HealthCare Partners and Oncology Institute 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.