Correlation Between Outset Medical and Enhabit

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

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

Diversification Opportunities for Outset Medical and Enhabit

0.78

Correlation Coefficient

Outset Medical  Enhabit

Poor diversification

The 3 months correlation between Outset and Enhabit is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit and Outset Medical 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 Outset Medical are associated (or correlated) with Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Outset Medical i.e., Outset Medical and Enhabit go up and down completely randomly.

Pair Corralation between Outset Medical and Enhabit

Allowing for the 90-day total investment horizon Outset Medical is expected to under-perform the Enhabit. In addition to that, Outset Medical is 2.5 times more volatile than Enhabit. It trades about -0.01 of its total potential returns per unit of risk. Enhabit is currently generating about -0.02 per unit of volatility. If you would invest  1,011  in Enhabit on October 14, 2024 and sell it today you would lose (251.00) from holding Enhabit or give up 24.83% of portfolio value over 90 days.

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

Outset Medical  vs.  Enhabit

Outset Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Enhabit

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Outset Medical and Enhabit

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

The idea behind Outset Medical and Enhabit 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.