Correlation Between Healthcare Services and Select Medical
Can any of the company-specific risk be diversified away by investing in both Healthcare Services 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 Healthcare Services and Select Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Healthcare Services Group and Select Medical Holdings, you can compare the effects of market volatilities on Healthcare Services 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 Healthcare Services with a short position of Select Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Services and Select Medical.
Diversification Opportunities for Healthcare Services and Select Medical
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Healthcare and Select is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group 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 Healthcare Services 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 Healthcare Services Group 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 Healthcare Services i.e., Healthcare Services and Select Medical go up and down completely randomly.
Pair Corralation between Healthcare Services and Select Medical
Given the investment horizon of 90 days Healthcare Services Group is expected to under-perform the Select Medical. But the stock apears to be less risky and, when comparing its historical volatility, Healthcare Services Group is 1.15 times less risky than Select Medical. The stock trades about -0.12 of its potential returns per unit of risk. The Select Medical Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,885 in Select Medical Holdings on November 1, 2024 and sell it today you would earn a total of 98.00 from holding Select Medical Holdings or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Healthcare Services Group vs. Select Medical Holdings
Performance |
| Timeline |
| Healthcare Services |
| Select Medical Holdings |
Healthcare Services and Select Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Healthcare Services and Select Medical
The main advantage of trading using opposite Healthcare Services and Select Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Services 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.| Healthcare Services vs. Pennant Group | Healthcare Services vs. Surgery Partners | Healthcare Services vs. The Ensign Group | Healthcare Services vs. Encompass Health Corp |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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