Correlation Between Select Medical and Guardian Pharmacy

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

Diversification Opportunities for Select Medical and Guardian Pharmacy

0.74

Correlation Coefficient

Select Medical  Guardian Pharmacy

Poor diversification

The 3 months correlation between Select and Guardian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Guardian Pharmacy Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Pharmacy 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 Guardian Pharmacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Pharmacy has no effect on the direction of Select Medical i.e., Select Medical and Guardian Pharmacy go up and down completely randomly.

Pair Corralation between Select Medical and Guardian Pharmacy

Considering the 90-day investment horizon Select Medical Holdings is expected to under-perform the Guardian Pharmacy. But the stock apears to be less risky and, when comparing its historical volatility, Select Medical Holdings is 1.57 times less risky than Guardian Pharmacy. The stock trades about -0.01 of its potential returns per unit of risk. The Guardian Pharmacy Services, is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,600  in Guardian Pharmacy Services, on October 22, 2024 and sell it today you would earn a total of  469.00  from holding Guardian Pharmacy Services, or generate 29.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	63.2%
Values	Daily Returns

Select Medical Holdings  vs.  Guardian Pharmacy Services,

Select Medical Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Select Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guardian Pharmacy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Pharmacy Services, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Guardian Pharmacy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Select Medical and Guardian Pharmacy

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

The idea behind Select Medical Holdings and Guardian Pharmacy 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.