Correlation Between Encompass Health and Concord Medical

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

By analyzing existing cross correlation between Encompass Health Corp and Concord Medical Services, you can compare the effects of market volatilities on Encompass Health and Concord Medical 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 Encompass Health with a short position of Concord Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encompass Health and Concord Medical.

Diversification Opportunities for Encompass Health and Concord Medical

-0.13

Correlation Coefficient

Encompass Health  Concord Medical

Good diversification

The 3 months correlation between Encompass and Concord is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp and Concord Medical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concord Medical Services and Encompass Health 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 Encompass Health Corp are associated (or correlated) with Concord Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concord Medical Services has no effect on the direction of Encompass Health i.e., Encompass Health and Concord Medical go up and down completely randomly.

Pair Corralation between Encompass Health and Concord Medical

Considering the 90-day investment horizon Encompass Health Corp is expected to generate 0.18 times more return on investment than Concord Medical. However, Encompass Health Corp is 5.58 times less risky than Concord Medical. It trades about 0.12 of its potential returns per unit of risk. Concord Medical Services is currently generating about -0.01 per unit of risk. If you would invest  9,225  in Encompass Health Corp on December 29, 2024 and sell it today you would earn a total of  889.00  from holding Encompass Health Corp or generate 9.64% return on investment over 90 days.

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

Encompass Health Corp  vs.  Concord Medical Services

Encompass Health Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Encompass Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Concord Medical Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Concord Medical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Encompass Health and Concord Medical

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

The idea behind Encompass Health Corp and Concord Medical Services 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.