Correlation Between Zynex and Encompass Health

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

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

Diversification Opportunities for Zynex and Encompass Health

0.67

Correlation Coefficient

Zynex  Encompass Health

Poor diversification

The 3 months correlation between Zynex and Encompass is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Zynex Inc and Encompass Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Health Corp and Zynex 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 Zynex Inc are associated (or correlated) with Encompass Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Health Corp has no effect on the direction of Zynex i.e., Zynex and Encompass Health go up and down completely randomly.

Pair Corralation between Zynex and Encompass Health

Given the investment horizon of 90 days Zynex Inc is expected to generate 2.13 times more return on investment than Encompass Health. However, Zynex is 2.13 times more volatile than Encompass Health Corp. It trades about 0.12 of its potential returns per unit of risk. Encompass Health Corp is currently generating about 0.2 per unit of risk. If you would invest  744.00  in Zynex Inc on August 13, 2024 and sell it today you would earn a total of  157.00  from holding Zynex Inc or generate 21.1% return on investment over 90 days.

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

Zynex Inc  vs.  Encompass Health Corp

Zynex Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zynex Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Zynex demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Encompass Health Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Encompass Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zynex and Encompass Health

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

The idea behind Zynex Inc and Encompass Health 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.