Correlation Between Definitive Healthcare and Ensign

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

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

Diversification Opportunities for Definitive Healthcare and Ensign

-0.2

Correlation Coefficient

Definitive Healthcare  Ensign

Good diversification

The 3 months correlation between Definitive and Ensign is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and Definitive 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 Definitive Healthcare Corp are associated (or correlated) with Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and Ensign go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Ensign

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the Ensign. In addition to that, Definitive Healthcare is 2.75 times more volatile than The Ensign Group. It trades about -0.03 of its total potential returns per unit of risk. The Ensign Group is currently generating about 0.06 per unit of volatility. If you would invest  9,415  in The Ensign Group on September 23, 2024 and sell it today you would earn a total of  4,044  from holding The Ensign Group or generate 42.95% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  The Ensign Group

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Definitive Healthcare and Ensign

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

The idea behind Definitive Healthcare Corp and The Ensign Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.