Correlation Between Encompass Health and Fresenius
Can any of the company-specific risk be diversified away by investing in both Encompass Health and Fresenius 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 Fresenius 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 Fresenius SE Co, you can compare the effects of market volatilities on Encompass Health and Fresenius 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 Fresenius. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encompass Health and Fresenius.
Diversification Opportunities for Encompass Health and Fresenius
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Encompass and Fresenius is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Encompass Health i.e., Encompass Health and Fresenius go up and down completely randomly.
Pair Corralation between Encompass Health and Fresenius
Considering the 90-day investment horizon Encompass Health Corp is expected to generate 0.82 times more return on investment than Fresenius. However, Encompass Health Corp is 1.21 times less risky than Fresenius. It trades about 0.09 of its potential returns per unit of risk. Fresenius SE Co is currently generating about 0.04 per unit of risk. If you would invest 5,792 in Encompass Health Corp on September 12, 2024 and sell it today you would earn a total of 4,337 from holding Encompass Health Corp or generate 74.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Encompass Health Corp vs. Fresenius SE Co
Performance |
| Timeline |
| Encompass Health Corp |
| Fresenius SE |
Encompass Health and Fresenius Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encompass Health and Fresenius
The main advantage of trading using opposite Encompass Health and Fresenius positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encompass Health position performs unexpectedly, Fresenius 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 Fresenius will offset losses from the drop in Fresenius' long position.| Encompass Health vs. Pennant Group | Encompass Health vs. The Ensign Group | Encompass Health vs. InnovAge Holding Corp | Encompass Health vs. ModivCare |
| Fresenius vs. Pennant Group | Fresenius vs. Encompass Health Corp | Fresenius vs. Enhabit | Fresenius vs. Concord Medical Services |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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