Correlation Between Select Medical and Amedisys

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

By analyzing existing cross correlation between Select Medical Holdings and Amedisys, you can compare the effects of market volatilities on Select Medical and Amedisys 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 Select Medical with a short position of Amedisys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Amedisys.

Diversification Opportunities for Select Medical and Amedisys

-0.49

Correlation Coefficient

Select Medical  Amedisys

Very good diversification

The 3 months correlation between Select and Amedisys is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys and Select Medical 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 Select Medical Holdings are associated (or correlated) with Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Select Medical i.e., Select Medical and Amedisys go up and down completely randomly.

Pair Corralation between Select Medical and Amedisys

Considering the 90-day investment horizon Select Medical Holdings is expected to generate 2.29 times more return on investment than Amedisys. However, Select Medical is 2.29 times more volatile than Amedisys. It trades about 0.09 of its potential returns per unit of risk. Amedisys is currently generating about -0.26 per unit of risk. If you would invest  1,742  in Select Medical Holdings on September 24, 2024 and sell it today you would earn a total of  164.00  from holding Select Medical Holdings or generate 9.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Select Medical Holdings  vs.  Amedisys

Select Medical Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Select Medical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Select Medical and Amedisys

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

The idea behind Select Medical Holdings and Amedisys 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.