Correlation Between NMC Health and P3 Health

Can any of the company-specific risk be diversified away by investing in both NMC Health and P3 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 NMC Health and P3 Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NMC Health PLC and P3 Health Partners, you can compare the effects of market volatilities on NMC Health and P3 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 NMC Health with a short position of P3 Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMC Health and P3 Health.

Diversification Opportunities for NMC Health and P3 Health

0.3

Correlation Coefficient

NMC Health  P3 Health

Weak diversification

The 3 months correlation between NMC and PIII is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NMC Health PLC and P3 Health Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on P3 Health Partners and NMC Health 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 NMC Health PLC are associated (or correlated) with P3 Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of P3 Health Partners has no effect on the direction of NMC Health i.e., NMC Health and P3 Health go up and down completely randomly.

Pair Corralation between NMC Health and P3 Health

Assuming the 90 days horizon NMC Health PLC is expected to under-perform the P3 Health. In addition to that, NMC Health is 1.71 times more volatile than P3 Health Partners. It trades about -0.11 of its total potential returns per unit of risk. P3 Health Partners is currently generating about -0.01 per unit of volatility. If you would invest  127.00  in P3 Health Partners on October 20, 2024 and sell it today you would lose (106.00) from holding P3 Health Partners or give up 83.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.44%
Values	Daily Returns

NMC Health PLC  vs.  P3 Health Partners

NMC Health PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMC Health PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, NMC Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

P3 Health Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days P3 Health Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with NMC Health and P3 Health

The main advantage of trading using opposite NMC Health and P3 Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMC Health position performs unexpectedly, P3 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 P3 Health will offset losses from the drop in P3 Health's long position.

The idea behind NMC Health PLC and P3 Health Partners 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.