Correlation Between Ensign and Select Medical

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

By analyzing existing cross correlation between The Ensign Group and Select Medical Holdings, you can compare the effects of market volatilities on Ensign and Select 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 Ensign with a short position of Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and Select Medical.

Diversification Opportunities for Ensign and Select Medical

0.85

Correlation Coefficient

Ensign  Select Medical

Very poor diversification

The 3 months correlation between Ensign and Select is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings and Ensign 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 The Ensign Group are associated (or correlated) with Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of Ensign i.e., Ensign and Select Medical go up and down completely randomly.

Pair Corralation between Ensign and Select Medical

Given the investment horizon of 90 days The Ensign Group is expected to generate 0.84 times more return on investment than Select Medical. However, The Ensign Group is 1.2 times less risky than Select Medical. It trades about -0.08 of its potential returns per unit of risk. Select Medical Holdings is currently generating about -0.09 per unit of risk. If you would invest  14,614  in The Ensign Group on November 28, 2024 and sell it today you would lose (1,327) from holding The Ensign Group or give up 9.08% of portfolio value over 90 days.

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

The Ensign Group  vs.  Select Medical Holdings

Ensign Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Select Medical Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Select Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and 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 Ensign and Select Medical

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

The idea behind The Ensign Group and Select Medical Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.