Correlation Between Outset Medical and Tenet Healthcare

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

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

Diversification Opportunities for Outset Medical and Tenet Healthcare

-0.75

Correlation Coefficient

Outset Medical  Tenet Healthcare

Pay attention - limited upside

The 3 months correlation between Outset and Tenet is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Tenet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Healthcare 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 Tenet Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenet Healthcare has no effect on the direction of Outset Medical i.e., Outset Medical and Tenet Healthcare go up and down completely randomly.

Pair Corralation between Outset Medical and Tenet Healthcare

Allowing for the 90-day total investment horizon Outset Medical is expected to under-perform the Tenet Healthcare. In addition to that, Outset Medical is 3.29 times more volatile than Tenet Healthcare. It trades about -0.04 of its total potential returns per unit of risk. Tenet Healthcare is currently generating about 0.07 per unit of volatility. If you would invest  7,664  in Tenet Healthcare on September 28, 2024 and sell it today you would earn a total of  4,966  from holding Tenet Healthcare or generate 64.8% return on investment over 90 days.

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

Outset Medical  vs.  Tenet Healthcare

Outset Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Tenet Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenet Healthcare 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 technical 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 Outset Medical and Tenet Healthcare

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

The idea behind Outset Medical and Tenet 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.