Correlation Between Enhabit and Nova Leap

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

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

Diversification Opportunities for Enhabit and Nova Leap

-0.29

Correlation Coefficient

Enhabit  Nova Leap

Very good diversification

The 3 months correlation between Enhabit and Nova is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and Nova Leap Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Leap Health 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 Nova Leap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Leap Health has no effect on the direction of Enhabit i.e., Enhabit and Nova Leap go up and down completely randomly.

Pair Corralation between Enhabit and Nova Leap

Given the investment horizon of 90 days Enhabit is expected to generate 0.6 times more return on investment than Nova Leap. However, Enhabit is 1.68 times less risky than Nova Leap. It trades about 0.05 of its potential returns per unit of risk. Nova Leap Health is currently generating about 0.0 per unit of risk. If you would invest  786.00  in Enhabit on December 2, 2024 and sell it today you would earn a total of  51.00  from holding Enhabit or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Enhabit  vs.  Nova Leap Health

Enhabit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nova Leap Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Leap Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nova Leap is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enhabit and Nova Leap

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

The idea behind Enhabit and Nova Leap Health 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.