Correlation Between Encompass Health and Acadia Healthcare
Can any of the company-specific risk be diversified away by investing in both Encompass Health and Acadia 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 Encompass Health and Acadia Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encompass Health Corp and Acadia Healthcare, you can compare the effects of market volatilities on Encompass Health and Acadia 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 Encompass Health with a short position of Acadia Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encompass Health and Acadia Healthcare.
Diversification Opportunities for Encompass Health and Acadia Healthcare
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Encompass and Acadia is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Encompass 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 Encompass Health Corp are associated (or correlated) with Acadia Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Healthcare has no effect on the direction of Encompass Health i.e., Encompass Health and Acadia Healthcare go up and down completely randomly.
Pair Corralation between Encompass Health and Acadia Healthcare
Considering the 90-day investment horizon Encompass Health Corp is expected to generate 0.43 times more return on investment than Acadia Healthcare. However, Encompass Health Corp is 2.32 times less risky than Acadia Healthcare. It trades about 0.24 of its potential returns per unit of risk. Acadia Healthcare is currently generating about -0.24 per unit of risk. If you would invest 9,309 in Encompass Health Corp on August 28, 2024 and sell it today you would earn a total of 891.00 from holding Encompass Health Corp or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encompass Health Corp vs. Acadia Healthcare
Performance |
| Timeline |
| Encompass Health Corp |
| Acadia Healthcare |
Encompass Health and Acadia Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encompass Health and Acadia Healthcare
The main advantage of trading using opposite Encompass Health and Acadia Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encompass Health position performs unexpectedly, Acadia 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 Acadia Healthcare will offset losses from the drop in Acadia Healthcare's long position.| Encompass Health vs. Pennant Group | Encompass Health vs. The Ensign Group | Encompass Health vs. InnovAge Holding Corp | Encompass Health vs. ModivCare |
| Acadia Healthcare vs. Encompass Health Corp | Acadia Healthcare vs. Pennant Group | Acadia Healthcare vs. Select Medical Holdings | Acadia Healthcare vs. Addus HomeCare |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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