Correlation Between Enhabit and Biohaven Pharmaceutical

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

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

Diversification Opportunities for Enhabit and Biohaven Pharmaceutical

0.1

Correlation Coefficient

Enhabit  Biohaven Pharmaceutical

Average diversification

The 3 months correlation between Enhabit and Biohaven is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and Biohaven Pharmaceutical Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biohaven Pharmaceutical and Enhabit 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 Enhabit are associated (or correlated) with Biohaven Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biohaven Pharmaceutical has no effect on the direction of Enhabit i.e., Enhabit and Biohaven Pharmaceutical go up and down completely randomly.

Pair Corralation between Enhabit and Biohaven Pharmaceutical

Given the investment horizon of 90 days Enhabit is expected to generate 0.58 times more return on investment than Biohaven Pharmaceutical. However, Enhabit is 1.73 times less risky than Biohaven Pharmaceutical. It trades about 0.07 of its potential returns per unit of risk. Biohaven Pharmaceutical Holding is currently generating about -0.25 per unit of risk. If you would invest  824.00  in Enhabit on December 8, 2024 and sell it today you would earn a total of  29.00  from holding Enhabit or generate 3.52% return on investment over 90 days.

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

Enhabit  vs.  Biohaven Pharmaceutical Holdin

Enhabit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enhabit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enhabit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Biohaven Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biohaven Pharmaceutical Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Enhabit and Biohaven Pharmaceutical

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

The idea behind Enhabit and Biohaven Pharmaceutical Holding 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.