Correlation Between Mativ Holdings and Community

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

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

Diversification Opportunities for Mativ Holdings and Community

0.72

Correlation Coefficient

Mativ Holdings  Community

Poor diversification

The 3 months correlation between Mativ and Community is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mativ Holdings and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems and Mativ Holdings 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 Mativ Holdings are associated (or correlated) with Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of Mativ Holdings i.e., Mativ Holdings and Community go up and down completely randomly.

Pair Corralation between Mativ Holdings and Community

Given the investment horizon of 90 days Mativ Holdings is expected to generate 1.52 times more return on investment than Community. However, Mativ Holdings is 1.52 times more volatile than Community Health Systems. It trades about -0.2 of its potential returns per unit of risk. Community Health Systems is currently generating about -0.31 per unit of risk. If you would invest  1,566  in Mativ Holdings on October 21, 2024 and sell it today you would lose (610.00) from holding Mativ Holdings or give up 38.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	66.13%
Values	Daily Returns

Mativ Holdings  vs.  Community Health Systems

Mativ Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mativ Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Community Health Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Community Health Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Community Health Systems investors.

Pair Trading with Mativ Holdings and Community

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

The idea behind Mativ Holdings and Community Health Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.