Correlation Between Tenet Healthcare and Enhabit

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

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

Diversification Opportunities for Tenet Healthcare and Enhabit

0.08

Correlation Coefficient

Tenet Healthcare  Enhabit

Significant diversification

The 3 months correlation between Tenet and Enhabit is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tenet Healthcare and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit and Tenet Healthcare 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 Tenet Healthcare are associated (or correlated) with Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Tenet Healthcare i.e., Tenet Healthcare and Enhabit go up and down completely randomly.

Pair Corralation between Tenet Healthcare and Enhabit

Considering the 90-day investment horizon Tenet Healthcare is expected to under-perform the Enhabit. But the stock apears to be less risky and, when comparing its historical volatility, Tenet Healthcare is 1.17 times less risky than Enhabit. The stock trades about -0.03 of its potential returns per unit of risk. The Enhabit is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  773.00  in Enhabit on November 29, 2024 and sell it today you would earn a total of  51.00  from holding Enhabit or generate 6.6% return on investment over 90 days.

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

Tenet Healthcare  vs.  Enhabit

Tenet Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tenet Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Tenet Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Enhabit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Tenet Healthcare and Enhabit

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

The idea behind Tenet Healthcare and Enhabit 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.