Correlation Between Tenet Healthcare and Kindred Healthcare

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

By analyzing existing cross correlation between Tenet Healthcare and Kindred Healthcare, you can compare the effects of market volatilities on Tenet Healthcare and Kindred Healthcare 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 Tenet Healthcare with a short position of Kindred Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenet Healthcare and Kindred Healthcare.

Diversification Opportunities for Tenet Healthcare and Kindred Healthcare

0.0

Correlation Coefficient

Tenet Healthcare  Kindred Healthcare

Pay attention - limited upside

The 3 months correlation between Tenet and Kindred is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tenet Healthcare and Kindred Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kindred Healthcare and Tenet 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 Tenet Healthcare are associated (or correlated) with Kindred Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kindred Healthcare has no effect on the direction of Tenet Healthcare i.e., Tenet Healthcare and Kindred Healthcare go up and down completely randomly.

Pair Corralation between Tenet Healthcare and Kindred Healthcare

If you would invest  10,309  in Tenet Healthcare on February 3, 2024 and sell it today you would earn a total of  1,585  from holding Tenet Healthcare or generate 15.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Tenet Healthcare  vs.  Kindred Healthcare

Tenet Healthcare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenet Healthcare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Tenet Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kindred Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kindred Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kindred Healthcare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tenet Healthcare and Kindred Healthcare

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

The idea behind Tenet Healthcare and Kindred Healthcare 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..