Correlation Between Fresenius Medical and Enhabit

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

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

Diversification Opportunities for Fresenius Medical and Enhabit

-0.69

Correlation Coefficient

Fresenius Medical  Enhabit

Excellent diversification

The 3 months correlation between Fresenius and Enhabit is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit and Fresenius 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 Fresenius Medical Care are associated (or correlated) with Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Enhabit go up and down completely randomly.

Pair Corralation between Fresenius Medical and Enhabit

Considering the 90-day investment horizon Fresenius Medical Care is expected to generate 0.53 times more return on investment than Enhabit. However, Fresenius Medical Care is 1.89 times less risky than Enhabit. It trades about 0.06 of its potential returns per unit of risk. Enhabit is currently generating about -0.07 per unit of risk. If you would invest  2,081  in Fresenius Medical Care on March 7, 2024 and sell it today you would earn a total of  49.00  from holding Fresenius Medical Care or generate 2.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Fresenius Medical Care  vs.  Enhabit

Fresenius Medical Care

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, Fresenius Medical may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Enhabit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fresenius Medical and Enhabit

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

The idea behind Fresenius Medical Care and Enhabit 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.