Correlation Between Ensign and Chemed Corp
Can any of the company-specific risk be diversified away by investing in both Ensign 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 Ensign and Chemed Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Ensign Group and Chemed Corp, you can compare the effects of market volatilities on Ensign 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 Ensign with a short position of Chemed Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and Chemed Corp.
Diversification Opportunities for Ensign and Chemed Corp
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ensign and Chemed is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Chemed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed Corp and Ensign 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 The Ensign Group 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 Ensign i.e., Ensign and Chemed Corp go up and down completely randomly.
Pair Corralation between Ensign and Chemed Corp
Given the investment horizon of 90 days The Ensign Group is expected to under-perform the Chemed Corp. But the stock apears to be less risky and, when comparing its historical volatility, The Ensign Group is 1.09 times less risky than Chemed Corp. The stock trades about -0.05 of its potential returns per unit of risk. The Chemed Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 58,565 in Chemed Corp on January 19, 2024 and sell it today you would earn a total of 1,852 from holding Chemed Corp or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Ensign Group vs. Chemed Corp
Performance |
| Timeline |
| Ensign Group |
| Chemed Corp |
Ensign and Chemed Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ensign and Chemed Corp
The main advantage of trading using opposite Ensign and Chemed Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ensign 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.The idea behind The Ensign Group and Chemed Corp 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.| Chemed Corp vs. Encompass Health Corp | Chemed Corp vs. Surgery Partners | Chemed Corp vs. Healthcare Services Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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