Correlation Between Regional Health and DaVita HealthCare

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

Diversification Opportunities for Regional Health and DaVita HealthCare

0.24

Correlation Coefficient

Regional Health  DaVita HealthCare

Modest diversification

The 3 months correlation between Regional and DaVita is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Regional Health Properties and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare 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 DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Regional Health i.e., Regional Health and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Regional Health and DaVita HealthCare

Considering the 90-day investment horizon Regional Health Properties is expected to generate 9.73 times more return on investment than DaVita HealthCare. However, Regional Health is 9.73 times more volatile than DaVita HealthCare Partners. It trades about 0.1 of its potential returns per unit of risk. DaVita HealthCare Partners is currently generating about -0.11 per unit of risk. If you would invest  174.00  in Regional Health Properties on November 29, 2024 and sell it today you would earn a total of  58.00  from holding Regional Health Properties or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.27%
Values	Daily Returns

Regional Health Properties  vs.  DaVita HealthCare Partners

Regional Health Prop

Risk-Adjusted Performance

OK

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 weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

DaVita HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days DaVita HealthCare Partners 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 basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Regional Health and DaVita HealthCare

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

The idea behind Regional Health Properties and DaVita HealthCare Partners 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.