Correlation Between Encompass Health and Aethlon Medical

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

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

Diversification Opportunities for Encompass Health and Aethlon Medical

-0.68

Correlation Coefficient

Encompass Health  Aethlon Medical

Excellent diversification

The 3 months correlation between Encompass and Aethlon is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp and Aethlon Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aethlon Medical and Encompass Health 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 Encompass Health Corp are associated (or correlated) with Aethlon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aethlon Medical has no effect on the direction of Encompass Health i.e., Encompass Health and Aethlon Medical go up and down completely randomly.

Pair Corralation between Encompass Health and Aethlon Medical

Considering the 90-day investment horizon Encompass Health Corp is expected to generate 0.09 times more return on investment than Aethlon Medical. However, Encompass Health Corp is 10.67 times less risky than Aethlon Medical. It trades about 0.01 of its potential returns per unit of risk. Aethlon Medical is currently generating about -0.29 per unit of risk. If you would invest  8,451  in Encompass Health Corp on March 7, 2024 and sell it today you would lose (1.00) from holding Encompass Health Corp or give up 0.01% of portfolio value over 90 days.

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

Encompass Health Corp  vs.  Aethlon Medical

Encompass Health Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical indicators, Encompass Health may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Aethlon Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aethlon Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Encompass Health and Aethlon Medical

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

The idea behind Encompass Health Corp and Aethlon Medical 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.