Correlation Between Surgery Partners and Tenet Healthcare

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

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

Diversification Opportunities for Surgery Partners and Tenet Healthcare

0.39

Correlation Coefficient

Surgery Partners  Tenet Healthcare

Weak diversification

The 3 months correlation between Surgery and Tenet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Surgery Partners and Tenet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Healthcare and Surgery Partners 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 Surgery Partners are associated (or correlated) with Tenet Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenet Healthcare has no effect on the direction of Surgery Partners i.e., Surgery Partners and Tenet Healthcare go up and down completely randomly.

Pair Corralation between Surgery Partners and Tenet Healthcare

Given the investment horizon of 90 days Surgery Partners is expected to generate 1.27 times more return on investment than Tenet Healthcare. However, Surgery Partners is 1.27 times more volatile than Tenet Healthcare. It trades about 0.09 of its potential returns per unit of risk. Tenet Healthcare is currently generating about 0.05 per unit of risk. If you would invest  2,057  in Surgery Partners on December 28, 2024 and sell it today you would earn a total of  338.00  from holding Surgery Partners or generate 16.43% return on investment over 90 days.

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

Surgery Partners  vs.  Tenet Healthcare

Surgery Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Surgery Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Surgery Partners showed solid returns over the last few months and may actually be approaching a breakup point.

Tenet Healthcare

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Surgery Partners and Tenet Healthcare

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

The idea behind Surgery Partners and Tenet Healthcare 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.