Correlation Between Ensign and Tenet Healthcare

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

Diversification Opportunities for Ensign and Tenet Healthcare

0.65

Correlation Coefficient

Ensign  Tenet Healthcare

Poor diversification

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

Pair Corralation between Ensign and Tenet Healthcare

Given the investment horizon of 90 days The Ensign Group is expected to under-perform the Tenet Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, The Ensign Group is 1.27 times less risky than Tenet Healthcare. The stock trades about -0.02 of its potential returns per unit of risk. The Tenet Healthcare is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,542  in Tenet Healthcare on December 28, 2024 and sell it today you would earn a total of  902.00  from holding Tenet Healthcare or generate 7.19% return on investment over 90 days.

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

The Ensign Group  vs.  Tenet Healthcare

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 nearly stable basic indicators, Ensign is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tenet Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenet Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Tenet Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ensign and Tenet Healthcare

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

The idea behind The Ensign Group and Tenet Healthcare 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..