Correlation Between Alphabet and Select Medical
Can any of the company-specific risk be diversified away by investing in both Alphabet and Select Medical 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 Alphabet and Select Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Select Medical Holdings, you can compare the effects of market volatilities on Alphabet and Select Medical 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 Alphabet with a short position of Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Select Medical.
Diversification Opportunities for Alphabet and Select Medical
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alphabet and Select is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of Alphabet i.e., Alphabet and Select Medical go up and down completely randomly.
Pair Corralation between Alphabet and Select Medical
Given the investment horizon of 90 days Alphabet is expected to generate 11.37 times less return on investment than Select Medical. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.61 times less risky than Select Medical. It trades about 0.04 of its potential returns per unit of risk. Select Medical Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,263 in Select Medical Holdings on August 24, 2024 and sell it today you would earn a total of 644.00 from holding Select Medical Holdings or generate 19.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Select Medical Holdings
Performance |
| Timeline |
| Alphabet Class C |
| Select Medical Holdings |
Alphabet and Select Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Select Medical
The main advantage of trading using opposite Alphabet and Select Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Select Medical 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 Select Medical will offset losses from the drop in Select Medical's long position.The idea behind Alphabet Inc Class C and Select Medical Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Select Medical vs. The Ensign Group | Select Medical vs. Encompass Health Corp | Select Medical vs. InnovAge Holding Corp | Select Medical vs. Enhabit |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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