Correlation Between P3 Health and Select Medical

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

Diversification Opportunities for P3 Health and Select Medical

-0.08

Correlation Coefficient

P3 Health  Select Medical

Good diversification

The 3 months correlation between PIIIW and Select is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding P3 Health Partners and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings 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 Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of P3 Health i.e., P3 Health and Select Medical go up and down completely randomly.

Pair Corralation between P3 Health and Select Medical

Assuming the 90 days horizon P3 Health Partners is expected to generate 7.29 times more return on investment than Select Medical. However, P3 Health is 7.29 times more volatile than Select Medical Holdings. It trades about 0.1 of its potential returns per unit of risk. Select Medical Holdings is currently generating about -0.06 per unit of risk. If you would invest  1.00  in P3 Health Partners on December 28, 2024 and sell it today you would earn a total of  0.18  from holding P3 Health Partners or generate 18.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.33%
Values	Daily Returns

P3 Health Partners  vs.  Select Medical Holdings

P3 Health Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in P3 Health Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, P3 Health showed solid returns over the last few months and may actually be approaching a breakup point.

Select Medical Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Select Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with P3 Health and Select Medical

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

The idea behind P3 Health Partners and Select Medical Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.