Correlation Between Regional Health and CareRx

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

Diversification Opportunities for Regional Health and CareRx

0.61

Correlation Coefficient

Regional Health  CareRx

Poor diversification

The 3 months correlation between Regional and CareRx is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Regional Health Properties and CareRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx 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 CareRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx has no effect on the direction of Regional Health i.e., Regional Health and CareRx go up and down completely randomly.

Pair Corralation between Regional Health and CareRx

Considering the 90-day investment horizon Regional Health Properties is expected to under-perform the CareRx. In addition to that, Regional Health is 1.13 times more volatile than CareRx. It trades about -0.24 of its total potential returns per unit of risk. CareRx is currently generating about 0.22 per unit of volatility. If you would invest  128.00  in CareRx on October 6, 2024 and sell it today you would earn a total of  12.00  from holding CareRx or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Regional Health Properties  vs.  CareRx

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. In spite of rather sound technical indicators, Regional Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CareRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Regional Health and CareRx

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

The idea behind Regional Health Properties and CareRx 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.