Correlation Between Ryman Healthcare and Encompass Health

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

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

Diversification Opportunities for Ryman Healthcare and Encompass Health

-0.88

Correlation Coefficient

Ryman Healthcare  Encompass Health

Pay attention - limited upside

The 3 months correlation between Ryman and Encompass is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ryman Healthcare Ltd 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 Ryman 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 Ryman Healthcare Ltd 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 Ryman Healthcare i.e., Ryman Healthcare and Encompass Health go up and down completely randomly.

Pair Corralation between Ryman Healthcare and Encompass Health

Assuming the 90 days horizon Ryman Healthcare Ltd is expected to under-perform the Encompass Health. In addition to that, Ryman Healthcare is 1.31 times more volatile than Encompass Health Corp. It trades about -0.27 of its total potential returns per unit of risk. Encompass Health Corp is currently generating about 0.04 per unit of volatility. If you would invest  8,323  in Encompass Health Corp on February 28, 2024 and sell it today you would earn a total of  126.00  from holding Encompass Health Corp or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Ryman Healthcare Ltd  vs.  Encompass Health Corp

Ryman Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ryman Healthcare Ltd 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 basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Encompass Health Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Encompass Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryman Healthcare and Encompass Health

The main advantage of trading using opposite Ryman Healthcare and Encompass Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryman Healthcare 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 Ryman Healthcare Ltd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.