Correlation Between Select Medical and DaVita HealthCare

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

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

Diversification Opportunities for Select Medical and DaVita HealthCare

-0.09

Correlation Coefficient

Select Medical  DaVita HealthCare

Good diversification

The 3 months correlation between Select and DaVita is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare and Select Medical 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 Select Medical Holdings are associated (or correlated) with DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Select Medical i.e., Select Medical and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Select Medical and DaVita HealthCare

Considering the 90-day investment horizon Select Medical Holdings is expected to under-perform the DaVita HealthCare. In addition to that, Select Medical is 1.59 times more volatile than DaVita HealthCare Partners. It trades about -0.1 of its total potential returns per unit of risk. DaVita HealthCare Partners is currently generating about -0.01 per unit of volatility. If you would invest  14,262  in DaVita HealthCare Partners on May 6, 2025 and sell it today you would lose (310.00) from holding DaVita HealthCare Partners or give up 2.17% of portfolio value over 90 days.

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

Select Medical Holdings  vs.  DaVita HealthCare Partners

Select Medical Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Select Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in September 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

DaVita HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days DaVita HealthCare Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DaVita HealthCare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Select Medical and DaVita HealthCare

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

The idea behind Select Medical Holdings and DaVita HealthCare Partners 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.