Correlation Between Enhabit and NeuroMetrix

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

By analyzing existing cross correlation between Enhabit and NeuroMetrix, you can compare the effects of market volatilities on Enhabit and NeuroMetrix 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 NeuroMetrix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhabit and NeuroMetrix.

Diversification Opportunities for Enhabit and NeuroMetrix

-0.41

Correlation Coefficient

Enhabit  NeuroMetrix

Very good diversification

The 3 months correlation between Enhabit and NeuroMetrix is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and NeuroMetrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuroMetrix 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 NeuroMetrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuroMetrix has no effect on the direction of Enhabit i.e., Enhabit and NeuroMetrix go up and down completely randomly.

Pair Corralation between Enhabit and NeuroMetrix

Given the investment horizon of 90 days Enhabit is expected to generate 2.05 times less return on investment than NeuroMetrix. But when comparing it to its historical volatility, Enhabit is 1.37 times less risky than NeuroMetrix. It trades about 0.04 of its potential returns per unit of risk. NeuroMetrix is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  387.00  in NeuroMetrix on September 4, 2024 and sell it today you would earn a total of  44.00  from holding NeuroMetrix or generate 11.37% return on investment over 90 days.

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

Enhabit  vs.  NeuroMetrix

Enhabit

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NeuroMetrix

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NeuroMetrix are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, NeuroMetrix displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enhabit and NeuroMetrix

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

The idea behind Enhabit and NeuroMetrix 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.