Correlation Between Option Care and Ensign

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

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

Diversification Opportunities for Option Care and Ensign

0.61

Correlation Coefficient

Option Care  Ensign

Poor diversification

The 3 months correlation between Option and Ensign is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and Option Care 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 Option Care Health are associated (or correlated) with Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Option Care i.e., Option Care and Ensign go up and down completely randomly.

Pair Corralation between Option Care and Ensign

Given the investment horizon of 90 days Option Care Health is expected to under-perform the Ensign. In addition to that, Option Care is 1.46 times more volatile than The Ensign Group. It trades about -0.14 of its total potential returns per unit of risk. The Ensign Group is currently generating about -0.07 per unit of volatility. If you would invest  11,904  in The Ensign Group on February 6, 2024 and sell it today you would lose (215.00) from holding The Ensign Group or give up 1.81% of portfolio value over 90 days.

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

Option Care Health  vs.  The Ensign Group

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.

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ensign is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Option Care and Ensign

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

The idea behind Option Care Health and The Ensign Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .