Correlation Between Brookdale Senior and Encompass Health
Can any of the company-specific risk be diversified away by investing in both Brookdale Senior and Encompass Health 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 Brookdale Senior and Encompass Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookdale Senior Living and Encompass Health Corp, you can compare the effects of market volatilities on Brookdale Senior and Encompass Health 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 Brookdale Senior with a short position of Encompass Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookdale Senior and Encompass Health.
Diversification Opportunities for Brookdale Senior and Encompass Health
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brookdale and Encompass is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Encompass Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Health Corp and Brookdale Senior 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 Brookdale Senior Living are associated (or correlated) with Encompass Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Health Corp has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Encompass Health go up and down completely randomly.
Pair Corralation between Brookdale Senior and Encompass Health
Considering the 90-day investment horizon Brookdale Senior Living is expected to under-perform the Encompass Health. In addition to that, Brookdale Senior is 1.96 times more volatile than Encompass Health Corp. It trades about -0.2 of its total potential returns per unit of risk. Encompass Health Corp is currently generating about 0.35 per unit of volatility. If you would invest 9,185 in Encompass Health Corp on November 3, 2024 and sell it today you would earn a total of 742.00 from holding Encompass Health Corp or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Brookdale Senior Living vs. Encompass Health Corp
Performance |
| Timeline |
| Brookdale Senior Living |
| Encompass Health Corp |
Brookdale Senior and Encompass Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookdale Senior and Encompass Health
The main advantage of trading using opposite Brookdale Senior and Encompass Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookdale Senior position performs unexpectedly, Encompass Health 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 Encompass Health will offset losses from the drop in Encompass Health's long position.| Brookdale Senior vs. The Ensign Group | Brookdale Senior vs. Community Health Systems | Brookdale Senior vs. National HealthCare | Brookdale Senior vs. Mednax Inc |
| Encompass Health vs. Pennant Group | Encompass Health vs. The Ensign Group | Encompass Health vs. InnovAge Holding Corp | Encompass Health vs. ModivCare |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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