Correlation Between P3 Health and WashTec AG

Can any of the company-specific risk be diversified away by investing in both P3 Health and WashTec AG 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 WashTec AG 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 WashTec AG, you can compare the effects of market volatilities on P3 Health and WashTec AG 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 WashTec AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of P3 Health and WashTec AG.

Diversification Opportunities for P3 Health and WashTec AG

0.78

Correlation Coefficient

P3 Health  WashTec AG

Poor diversification

The 3 months correlation between PIII and WashTec is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding P3 Health Partners and WashTec AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WashTec AG 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 WashTec AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WashTec AG has no effect on the direction of P3 Health i.e., P3 Health and WashTec AG go up and down completely randomly.

Pair Corralation between P3 Health and WashTec AG

Given the investment horizon of 90 days P3 Health Partners is expected to generate 1.95 times more return on investment than WashTec AG. However, P3 Health is 1.95 times more volatile than WashTec AG. It trades about -0.04 of its potential returns per unit of risk. WashTec AG is currently generating about -0.16 per unit of risk. If you would invest  21.00  in P3 Health Partners on December 29, 2024 and sell it today you would lose (4.00) from holding P3 Health Partners or give up 19.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

P3 Health Partners  vs.  WashTec AG

P3 Health Partners

Risk-Adjusted Performance

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 April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

WashTec AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days WashTec AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with P3 Health and WashTec AG

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

The idea behind P3 Health Partners and WashTec AG 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.