Correlation Between Elevance Health and Enhabit

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

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

Diversification Opportunities for Elevance Health and Enhabit

0.83

Correlation Coefficient

Elevance Health  Enhabit

Very poor diversification

The 3 months correlation between Elevance and Enhabit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit and Elevance 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 Elevance Health are associated (or correlated) with Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Elevance Health i.e., Elevance Health and Enhabit go up and down completely randomly.

Pair Corralation between Elevance Health and Enhabit

Considering the 90-day investment horizon Elevance Health is expected to generate 0.7 times more return on investment than Enhabit. However, Elevance Health is 1.42 times less risky than Enhabit. It trades about 0.17 of its potential returns per unit of risk. Enhabit is currently generating about 0.1 per unit of risk. If you would invest  36,726  in Elevance Health on December 29, 2024 and sell it today you would earn a total of  6,474  from holding Elevance Health or generate 17.63% return on investment over 90 days.

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

Elevance Health  vs.  Enhabit

Elevance Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elevance Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, Elevance Health showed solid returns over the last few months and may actually be approaching a breakup point.

Enhabit

Risk-Adjusted Performance

OK

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

Pair Trading with Elevance Health and Enhabit

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

The idea behind Elevance Health and Enhabit 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.