Correlation Between Joint Corp and Encompass Health

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

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

Diversification Opportunities for Joint Corp and Encompass Health

0.87

Correlation Coefficient

Joint Corp  Encompass Health

Very poor diversification

The 3 months correlation between Joint and Encompass is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Joint Corp and Encompass Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Health Corp and Joint Corp 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 Joint Corp are associated (or correlated) with Encompass Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Health Corp has no effect on the direction of Joint Corp i.e., Joint Corp and Encompass Health go up and down completely randomly.

Pair Corralation between Joint Corp and Encompass Health

Given the investment horizon of 90 days The Joint Corp is expected to under-perform the Encompass Health. In addition to that, Joint Corp is 1.61 times more volatile than Encompass Health Corp. It trades about -0.02 of its total potential returns per unit of risk. Encompass Health Corp is currently generating about -0.02 per unit of volatility. If you would invest  10,221  in Encompass Health Corp on December 1, 2024 and sell it today you would lose (207.00) from holding Encompass Health Corp or give up 2.03% of portfolio value over 90 days.

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

The Joint Corp  vs.  Encompass Health Corp

Joint Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Joint Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Joint Corp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Encompass Health Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Encompass Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Encompass Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Joint Corp and Encompass Health

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

The idea behind The Joint Corp and Encompass Health Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.