Correlation Between Amedisys and Select Medical

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

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

Diversification Opportunities for Amedisys and Select Medical

-0.35

Correlation Coefficient

Amedisys  Select Medical

Very good diversification

The 3 months correlation between Amedisys and Select is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amedisys and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings and Amedisys 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 Amedisys are associated (or correlated) with Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of Amedisys i.e., Amedisys and Select Medical go up and down completely randomly.

Pair Corralation between Amedisys and Select Medical

Given the investment horizon of 90 days Amedisys is expected to under-perform the Select Medical. But the stock apears to be less risky and, when comparing its historical volatility, Amedisys is 7.12 times less risky than Select Medical. The stock trades about -0.09 of its potential returns per unit of risk. The Select Medical Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Select Medical Holdings on February 4, 2024 and sell it today you would earn a total of  193.00  from holding Select Medical Holdings or generate 6.54% return on investment over 90 days.

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

Amedisys  vs.  Select Medical Holdings

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

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

Select Medical Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Select Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amedisys and Select Medical

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

The idea behind Amedisys and Select Medical Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.