Correlation Between Healthcare Services and Ensign

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

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

Diversification Opportunities for Healthcare Services and Ensign

0.45

Correlation Coefficient

Healthcare Services  Ensign

Very weak diversification

The 3 months correlation between Healthcare and Ensign is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and Healthcare Services 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 Healthcare Services Group are associated (or correlated) with Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Healthcare Services i.e., Healthcare Services and Ensign go up and down completely randomly.

Pair Corralation between Healthcare Services and Ensign

Given the investment horizon of 90 days Healthcare Services Group is expected to under-perform the Ensign. But the stock apears to be less risky and, when comparing its historical volatility, Healthcare Services Group is 1.13 times less risky than Ensign. The stock trades about -0.09 of its potential returns per unit of risk. The The Ensign Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  13,272  in The Ensign Group on December 30, 2024 and sell it today you would lose (398.00) from holding The Ensign Group or give up 3.0% of portfolio value over 90 days.

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

Healthcare Services Group  vs.  The Ensign Group

Healthcare Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Services 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.

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.

Pair Trading with Healthcare Services and Ensign

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

The idea behind Healthcare Services Group and The Ensign Group 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.