Correlation Between Enhabit and US Physicalrapy

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

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

Diversification Opportunities for Enhabit and US Physicalrapy

0.72

Correlation Coefficient

Enhabit  US Physicalrapy

Poor diversification

The 3 months correlation between Enhabit and USPH is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and US Physicalrapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physicalrapy 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 US Physicalrapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physicalrapy has no effect on the direction of Enhabit i.e., Enhabit and US Physicalrapy go up and down completely randomly.

Pair Corralation between Enhabit and US Physicalrapy

Given the investment horizon of 90 days Enhabit is expected to under-perform the US Physicalrapy. In addition to that, Enhabit is 1.26 times more volatile than US Physicalrapy. It trades about -0.37 of its total potential returns per unit of risk. US Physicalrapy is currently generating about -0.39 per unit of volatility. If you would invest  9,650  in US Physicalrapy on October 8, 2024 and sell it today you would lose (832.00) from holding US Physicalrapy or give up 8.62% of portfolio value over 90 days.

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

Enhabit  vs.  US Physicalrapy

Enhabit

Risk-Adjusted Performance

4 of 100

Modest

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 February 2025.

US Physicalrapy

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Physicalrapy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, US Physicalrapy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enhabit and US Physicalrapy

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

The idea behind Enhabit and US Physicalrapy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.