Correlation Between EP Financial and Regis Healthcare

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

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

Diversification Opportunities for EP Financial and Regis Healthcare

0.63

Correlation Coefficient

EP Financial  Regis Healthcare

Poor diversification

The 3 months correlation between EP1 and Regis is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Regis Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regis Healthcare and EP Financial 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 EP Financial Group are associated (or correlated) with Regis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regis Healthcare has no effect on the direction of EP Financial i.e., EP Financial and Regis Healthcare go up and down completely randomly.

Pair Corralation between EP Financial and Regis Healthcare

Assuming the 90 days trading horizon EP Financial is expected to generate 7.35 times less return on investment than Regis Healthcare. In addition to that, EP Financial is 1.44 times more volatile than Regis Healthcare. It trades about 0.01 of its total potential returns per unit of risk. Regis Healthcare is currently generating about 0.13 per unit of volatility. If you would invest  176.00  in Regis Healthcare on September 20, 2024 and sell it today you would earn a total of  460.00  from holding Regis Healthcare or generate 261.36% return on investment over 90 days.

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

EP Financial Group  vs.  Regis Healthcare

EP Financial Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Regis Healthcare

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regis Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Regis Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EP Financial and Regis Healthcare

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

The idea behind EP Financial Group and Regis 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.