Correlation Between Mednax and Acadia Healthcare

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

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

Diversification Opportunities for Mednax and Acadia Healthcare

-0.27

Correlation Coefficient

Mednax  Acadia Healthcare

Very good diversification

The 3 months correlation between Mednax and Acadia is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mednax Inc and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Mednax 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 Mednax Inc are associated (or correlated) with Acadia Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Healthcare has no effect on the direction of Mednax i.e., Mednax and Acadia Healthcare go up and down completely randomly.

Pair Corralation between Mednax and Acadia Healthcare

Allowing for the 90-day total investment horizon Mednax Inc is expected to generate 2.66 times more return on investment than Acadia Healthcare. However, Mednax is 2.66 times more volatile than Acadia Healthcare. It trades about 0.04 of its potential returns per unit of risk. Acadia Healthcare is currently generating about -0.15 per unit of risk. If you would invest  1,468  in Mednax Inc on November 28, 2024 and sell it today you would earn a total of  32.00  from holding Mednax Inc or generate 2.18% return on investment over 90 days.

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

Mednax Inc  vs.  Acadia Healthcare

Mednax Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mednax Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Mednax is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Acadia Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Acadia Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mednax and Acadia Healthcare

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

The idea behind Mednax Inc and Acadia 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.