Correlation Between Encompass Health and Option Care
Can any of the company-specific risk be diversified away by investing in both Encompass Health and Option Care 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 Option Care 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 Option Care Health, you can compare the effects of market volatilities on Encompass Health and Option Care 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 Option Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encompass Health and Option Care.
Diversification Opportunities for Encompass Health and Option Care
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Encompass and Option is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of Encompass Health i.e., Encompass Health and Option Care go up and down completely randomly.
Pair Corralation between Encompass Health and Option Care
Considering the 90-day investment horizon Encompass Health Corp is expected to generate 0.49 times more return on investment than Option Care. However, Encompass Health Corp is 2.03 times less risky than Option Care. It trades about 0.11 of its potential returns per unit of risk. Option Care Health is currently generating about -0.06 per unit of risk. If you would invest 8,318 in Encompass Health Corp on August 24, 2024 and sell it today you would earn a total of 1,622 from holding Encompass Health Corp or generate 19.5% 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. Option Care Health
Performance |
| Timeline |
| Encompass Health Corp |
| Option Care Health |
Encompass Health and Option Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encompass Health and Option Care
The main advantage of trading using opposite Encompass Health and Option Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encompass Health position performs unexpectedly, Option Care 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 Option Care will offset losses from the drop in Option Care's long position.| Encompass Health vs. Pennant Group | Encompass Health vs. The Ensign Group | Encompass Health vs. InnovAge Holding Corp | Encompass Health vs. ModivCare |
| Option Care vs. Addus HomeCare | Option Care vs. Acadia Healthcare | Option Care vs. Encompass Health Corp | Option Care vs. Select Medical Holdings |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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