Correlation Between Regional Health and BrightSpring Health

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

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

Diversification Opportunities for Regional Health and BrightSpring Health

-0.28

Correlation Coefficient

Regional Health  BrightSpring Health

Very good diversification

The 3 months correlation between Regional and BrightSpring is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Regional Health Properties and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health and Regional 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 Regional Health Properties are associated (or correlated) with BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of Regional Health i.e., Regional Health and BrightSpring Health go up and down completely randomly.

Pair Corralation between Regional Health and BrightSpring Health

Assuming the 90 days trading horizon Regional Health is expected to generate 1.15 times less return on investment than BrightSpring Health. In addition to that, Regional Health is 5.75 times more volatile than BrightSpring Health Services,. It trades about 0.02 of its total potential returns per unit of risk. BrightSpring Health Services, is currently generating about 0.14 per unit of volatility. If you would invest  4,377  in BrightSpring Health Services, on September 30, 2024 and sell it today you would earn a total of  1,917  from holding BrightSpring Health Services, or generate 43.8% return on investment over 90 days.

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

Regional Health Properties  vs.  BrightSpring Health Services,

Regional Health Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BrightSpring Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BrightSpring Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regional Health and BrightSpring Health

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

The idea behind Regional Health Properties and BrightSpring Health Services, 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.