Correlation Between Community Health and Chemed Corp
Can any of the company-specific risk be diversified away by investing in both Community Health and Chemed Corp 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 Community Health and Chemed Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Health Systems and Chemed Corp, you can compare the effects of market volatilities on Community Health and Chemed Corp 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 Community Health with a short position of Chemed Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Health and Chemed Corp.
Diversification Opportunities for Community Health and Chemed Corp
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Community and Chemed is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Community Health Systems and Chemed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed Corp and Community 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 Community Health Systems are associated (or correlated) with Chemed Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemed Corp has no effect on the direction of Community Health i.e., Community Health and Chemed Corp go up and down completely randomly.
Pair Corralation between Community Health and Chemed Corp
Considering the 90-day investment horizon Community Health Systems is expected to generate 1.86 times more return on investment than Chemed Corp. However, Community Health is 1.86 times more volatile than Chemed Corp. It trades about -0.05 of its potential returns per unit of risk. Chemed Corp is currently generating about -0.32 per unit of risk. If you would invest 340.00 in Community Health Systems on January 27, 2024 and sell it today you would lose (15.00) from holding Community Health Systems or give up 4.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Community Health Systems vs. Chemed Corp
Performance |
| Timeline |
| Community Health Systems |
| Chemed Corp |
Community Health and Chemed Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Health and Chemed Corp
The main advantage of trading using opposite Community Health and Chemed Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Health position performs unexpectedly, Chemed Corp 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 Chemed Corp will offset losses from the drop in Chemed Corp's long position.| Community Health vs. Universal Health Services | Community Health vs. HCA Holdings | Community Health vs. Surgery Partners | Community Health vs. Acadia Healthcare |
| Chemed Corp vs. Encompass Health Corp | Chemed Corp vs. Pennant Group | Chemed Corp vs. Acadia Healthcare | Chemed Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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