Correlation Between Community Health and Tenet Healthcare
Can any of the company-specific risk be diversified away by investing in both Community Health 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 Community Health and Tenet Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Health Systems and Tenet Healthcare, you can compare the effects of market volatilities on Community Health 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 Community Health with a short position of Tenet Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Health and Tenet Healthcare.
Diversification Opportunities for Community Health and Tenet Healthcare
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Community and Tenet is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Community Health Systems and Tenet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Healthcare and Community Health 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 Community Health Systems 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 Community Health i.e., Community Health and Tenet Healthcare go up and down completely randomly.
Pair Corralation between Community Health and Tenet Healthcare
Considering the 90-day investment horizon Community Health Systems is expected to under-perform the Tenet Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Community Health Systems is 1.36 times less risky than Tenet Healthcare. The stock trades about -0.13 of its potential returns per unit of risk. The Tenet Healthcare is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13,949 in Tenet Healthcare on August 28, 2024 and sell it today you would earn a total of 383.00 from holding Tenet Healthcare or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Health Systems vs. Tenet Healthcare
Performance |
| Timeline |
| Community Health Systems |
| Tenet Healthcare |
Community Health and Tenet Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Health and Tenet Healthcare
The main advantage of trading using opposite Community Health and Tenet Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Health 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.| Community Health vs. Universal Health Services | Community Health vs. HCA Holdings | Community Health vs. Surgery Partners | Community Health vs. Acadia Healthcare |
| Tenet Healthcare vs. Acadia Healthcare | Tenet Healthcare vs. HCA Holdings | Tenet Healthcare vs. US Physicalrapy | Tenet Healthcare vs. DaVita HealthCare Partners |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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