Correlation Between WashTec AG and AMN Healthcare

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

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

Diversification Opportunities for WashTec AG and AMN Healthcare

-0.11

Correlation Coefficient

WashTec AG  AMN Healthcare

Good diversification

The 3 months correlation between WashTec and AMN is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding WashTec AG and AMN Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMN Healthcare Services and WashTec AG 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 WashTec AG are associated (or correlated) with AMN Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMN Healthcare Services has no effect on the direction of WashTec AG i.e., WashTec AG and AMN Healthcare go up and down completely randomly.

Pair Corralation between WashTec AG and AMN Healthcare

Assuming the 90 days horizon WashTec AG is expected to generate 1.0 times more return on investment than AMN Healthcare. However, WashTec AG is 1.0 times less risky than AMN Healthcare. It trades about 0.11 of its potential returns per unit of risk. AMN Healthcare Services is currently generating about -0.02 per unit of risk. If you would invest  368.00  in WashTec AG on November 20, 2024 and sell it today you would earn a total of  61.00  from holding WashTec AG or generate 16.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

WashTec AG  vs.  AMN Healthcare Services

WashTec AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, WashTec AG reported solid returns over the last few months and may actually be approaching a breakup point.

AMN Healthcare Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMN Healthcare Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, AMN Healthcare is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WashTec AG and AMN Healthcare

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

The idea behind WashTec AG and AMN Healthcare 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.