Correlation Between Select Medical and Healthcare Services
Can any of the company-specific risk be diversified away by investing in both Select Medical and Healthcare Services 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 Select Medical and Healthcare Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Medical Holdings and Healthcare Services Group, you can compare the effects of market volatilities on Select Medical and Healthcare Services 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 Select Medical with a short position of Healthcare Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Healthcare Services.
Diversification Opportunities for Select Medical and Healthcare Services
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Select and Healthcare is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Healthcare Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Services and Select Medical 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 Select Medical Holdings are associated (or correlated) with Healthcare Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Services has no effect on the direction of Select Medical i.e., Select Medical and Healthcare Services go up and down completely randomly.
Pair Corralation between Select Medical and Healthcare Services
Considering the 90-day investment horizon Select Medical Holdings is expected to generate 0.85 times more return on investment than Healthcare Services. However, Select Medical Holdings is 1.17 times less risky than Healthcare Services. It trades about 0.06 of its potential returns per unit of risk. Healthcare Services Group is currently generating about 0.0 per unit of risk. If you would invest 2,348 in Select Medical Holdings on August 24, 2024 and sell it today you would earn a total of 1,559 from holding Select Medical Holdings or generate 66.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Medical Holdings vs. Healthcare Services Group
Performance |
| Timeline |
| Select Medical Holdings |
| Healthcare Services |
Select Medical and Healthcare Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Medical and Healthcare Services
The main advantage of trading using opposite Select Medical and Healthcare Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Medical position performs unexpectedly, Healthcare Services 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 Healthcare Services will offset losses from the drop in Healthcare Services' long position.| Select Medical vs. The Ensign Group | Select Medical vs. Encompass Health Corp | Select Medical vs. InnovAge Holding Corp | Select Medical vs. Enhabit |
| Healthcare Services vs. Pennant Group | Healthcare Services vs. Surgery Partners | Healthcare Services vs. The Ensign Group | Healthcare Services vs. Encompass Health Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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