Correlation Between Elevance Health and Patterson Companies

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

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

Diversification Opportunities for Elevance Health and Patterson Companies

0.81

Correlation Coefficient

Elevance Health  Patterson Companies

Very poor diversification

The 3 months correlation between Elevance and Patterson is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Elevance Health i.e., Elevance Health and Patterson Companies go up and down completely randomly.

Pair Corralation between Elevance Health and Patterson Companies

Considering the 90-day investment horizon Elevance Health is expected to generate 17.65 times more return on investment than Patterson Companies. However, Elevance Health is 17.65 times more volatile than Patterson Companies. It trades about 0.17 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.21 per unit of risk. If you would invest  36,726  in Elevance Health on December 30, 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.  Patterson Companies

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.

Patterson Companies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Patterson Companies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Elevance Health and Patterson Companies

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

The idea behind Elevance Health and Patterson Companies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..