Correlation Between DaVita HealthCare and Option Care

Can any of the company-specific risk be diversified away by investing in both DaVita HealthCare and Option Care 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 DaVita HealthCare and Option Care into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DaVita HealthCare Partners and Option Care Health, you can compare the effects of market volatilities on DaVita HealthCare and Option Care 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 DaVita HealthCare with a short position of Option Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of DaVita HealthCare and Option Care.

Diversification Opportunities for DaVita HealthCare and Option Care

-0.13

Correlation Coefficient

DaVita HealthCare  Option Care

Good diversification

The 3 months correlation between DaVita and Option is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding DaVita HealthCare Partners and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health and DaVita HealthCare 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 DaVita HealthCare Partners are associated (or correlated) with Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of DaVita HealthCare i.e., DaVita HealthCare and Option Care go up and down completely randomly.

Pair Corralation between DaVita HealthCare and Option Care

Considering the 90-day investment horizon DaVita HealthCare Partners is expected to generate 1.1 times more return on investment than Option Care. However, DaVita HealthCare is 1.1 times more volatile than Option Care Health. It trades about 0.18 of its potential returns per unit of risk. Option Care Health is currently generating about -0.13 per unit of risk. If you would invest  12,573  in DaVita HealthCare Partners on February 3, 2024 and sell it today you would earn a total of  1,651  from holding DaVita HealthCare Partners or generate 13.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DaVita HealthCare Partners  vs.  Option Care Health

DaVita HealthCare

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DaVita HealthCare Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DaVita HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Option Care is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with DaVita HealthCare and Option Care

The main advantage of trading using opposite DaVita HealthCare and Option Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DaVita HealthCare position performs unexpectedly, Option Care 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 Option Care will offset losses from the drop in Option Care's long position.

The idea behind DaVita HealthCare Partners and Option Care Health 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.

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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.