Correlation Between Regional Health and Fresenius

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

Diversification Opportunities for Regional Health and Fresenius

0.65

Correlation Coefficient

Regional Health  Fresenius

Poor diversification

The 3 months correlation between Regional and Fresenius is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Regional Health Properties and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Regional Health i.e., Regional Health and Fresenius go up and down completely randomly.

Pair Corralation between Regional Health and Fresenius

Considering the 90-day investment horizon Regional Health Properties is expected to generate 4.22 times more return on investment than Fresenius. However, Regional Health is 4.22 times more volatile than Fresenius SE Co. It trades about -0.01 of its potential returns per unit of risk. Fresenius SE Co is currently generating about -0.06 per unit of risk. If you would invest  183.00  in Regional Health Properties on September 21, 2024 and sell it today you would lose (33.00) from holding Regional Health Properties or give up 18.03% of portfolio value over 90 days.

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

Regional Health Properties  vs.  Fresenius SE Co

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius SE Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fresenius is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Regional Health and Fresenius

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

The idea behind Regional Health Properties and Fresenius SE Co 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.