Correlation Between Medical Facilities and Amedisys

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

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

Diversification Opportunities for Medical Facilities and Amedisys

-0.73

Correlation Coefficient

Medical Facilities  Amedisys

Pay attention - limited upside

The 3 months correlation between Medical and Amedisys is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys and Medical Facilities 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 Medical Facilities are associated (or correlated) with Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Medical Facilities i.e., Medical Facilities and Amedisys go up and down completely randomly.

Pair Corralation between Medical Facilities and Amedisys

Assuming the 90 days horizon Medical Facilities is expected to generate 1.39 times more return on investment than Amedisys. However, Medical Facilities is 1.39 times more volatile than Amedisys. It trades about -0.08 of its potential returns per unit of risk. Amedisys is currently generating about -0.24 per unit of risk. If you would invest  1,128  in Medical Facilities on September 21, 2024 and sell it today you would lose (37.00) from holding Medical Facilities or give up 3.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Medical Facilities  vs.  Amedisys

Medical Facilities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Medical Facilities and Amedisys

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

The idea behind Medical Facilities and Amedisys 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.