Correlation Between Encompass Health and JD Health

Can any of the company-specific risk be diversified away by investing in both Encompass Health and JD Health 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 JD Health 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 JD Health International, you can compare the effects of market volatilities on Encompass Health and JD Health 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 JD Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encompass Health and JD Health.

Diversification Opportunities for Encompass Health and JD Health

0.65

Correlation Coefficient

Encompass Health  JD Health

Poor diversification

The 3 months correlation between Encompass and JDHIY is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp and JD Health International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Health International 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 JD Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Health International has no effect on the direction of Encompass Health i.e., Encompass Health and JD Health go up and down completely randomly.

Pair Corralation between Encompass Health and JD Health

If you would invest  381.00  in JD Health International on September 21, 2024 and sell it today you would earn a total of  0.00  from holding JD Health International or generate 0.0% return on investment over 90 days.

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

Encompass Health Corp  vs.  JD Health International

Encompass Health Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Encompass Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JD Health International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Health International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, JD Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Encompass Health and JD Health

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

The idea behind Encompass Health Corp and JD Health International 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 Commodity Directory module to find actively traded commodities issued by global exchanges.