Correlation Between P3 Health and Baxter International

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

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

Diversification Opportunities for P3 Health and Baxter International

-0.56

Correlation Coefficient

P3 Health  Baxter International

Excellent diversification

The 3 months correlation between PIII and Baxter is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding P3 Health Partners and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and P3 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 P3 Health Partners are associated (or correlated) with Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of P3 Health i.e., P3 Health and Baxter International go up and down completely randomly.

Pair Corralation between P3 Health and Baxter International

Given the investment horizon of 90 days P3 Health is expected to generate 1.09 times less return on investment than Baxter International. In addition to that, P3 Health is 3.02 times more volatile than Baxter International. It trades about 0.04 of its total potential returns per unit of risk. Baxter International is currently generating about 0.14 per unit of volatility. If you would invest  2,894  in Baxter International on December 24, 2024 and sell it today you would earn a total of  466.00  from holding Baxter International or generate 16.1% return on investment over 90 days.

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

P3 Health Partners  vs.  Baxter International

P3 Health Partners

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in P3 Health Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, P3 Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Baxter International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Baxter International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with P3 Health and Baxter International

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

The idea behind P3 Health Partners and Baxter International 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.