Correlation Between Fresenius and DaVita HealthCare

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

By analyzing existing cross correlation between Fresenius SE Co and DaVita HealthCare Partners, you can compare the effects of market volatilities on Fresenius and DaVita 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 Fresenius with a short position of DaVita HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius and DaVita HealthCare.

Diversification Opportunities for Fresenius and DaVita HealthCare

-0.07

Correlation Coefficient

Fresenius  DaVita HealthCare

Good diversification

The 3 months correlation between Fresenius and DaVita is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare and Fresenius 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 Fresenius SE Co are associated (or correlated) with DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Fresenius i.e., Fresenius and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Fresenius and DaVita HealthCare

Assuming the 90 days horizon Fresenius SE Co is expected to under-perform the DaVita HealthCare. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fresenius SE Co is 1.67 times less risky than DaVita HealthCare. The pink sheet trades about -0.05 of its potential returns per unit of risk. The DaVita HealthCare Partners is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  15,198  in DaVita HealthCare Partners on August 31, 2024 and sell it today you would earn a total of  1,365  from holding DaVita HealthCare Partners or generate 8.98% return on investment over 90 days.

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

Fresenius SE Co  vs.  DaVita HealthCare Partners

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius SE Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Fresenius is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DaVita HealthCare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DaVita HealthCare Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DaVita HealthCare may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fresenius and DaVita HealthCare

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

The idea behind Fresenius SE Co and DaVita HealthCare Partners 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.