Correlation Between Chemed Corp and Encompass Health
Can any of the company-specific risk be diversified away by investing in both Chemed Corp 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 Chemed Corp and Encompass Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chemed Corp and Encompass Health Corp, you can compare the effects of market volatilities on Chemed Corp 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 Chemed Corp with a short position of Encompass Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemed Corp and Encompass Health.
Diversification Opportunities for Chemed Corp and Encompass Health
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chemed and Encompass is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Chemed Corp 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 Chemed Corp 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 Chemed Corp 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 Chemed Corp i.e., Chemed Corp and Encompass Health go up and down completely randomly.
Pair Corralation between Chemed Corp and Encompass Health
Considering the 90-day investment horizon Chemed Corp is expected to generate 4.46 times less return on investment than Encompass Health. But when comparing it to its historical volatility, Chemed Corp is 1.03 times less risky than Encompass Health. It trades about 0.02 of its potential returns per unit of risk. Encompass Health Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,662 in Encompass Health Corp on August 24, 2024 and sell it today you would earn a total of 4,450 from holding Encompass Health Corp or generate 78.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chemed Corp vs. Encompass Health Corp
Performance |
| Timeline |
| Chemed Corp |
| Encompass Health Corp |
Chemed Corp and Encompass Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chemed Corp and Encompass Health
The main advantage of trading using opposite Chemed Corp and Encompass Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemed Corp 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.| Chemed Corp vs. Encompass Health Corp | Chemed Corp vs. Pennant Group | Chemed Corp vs. Acadia Healthcare | Chemed Corp vs. Select Medical Holdings |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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