Correlation Between Enhabit and Bioventus

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

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

Diversification Opportunities for Enhabit and Bioventus

-0.63

Correlation Coefficient

Enhabit  Bioventus

Excellent diversification

The 3 months correlation between Enhabit and Bioventus is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and Bioventus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioventus and Enhabit 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 Enhabit are associated (or correlated) with Bioventus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioventus has no effect on the direction of Enhabit i.e., Enhabit and Bioventus go up and down completely randomly.

Pair Corralation between Enhabit and Bioventus

Given the investment horizon of 90 days Enhabit is expected to under-perform the Bioventus. But the stock apears to be less risky and, when comparing its historical volatility, Enhabit is 1.42 times less risky than Bioventus. The stock trades about -0.01 of its potential returns per unit of risk. The Bioventus is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  999.00  in Bioventus on September 3, 2024 and sell it today you would earn a total of  230.00  from holding Bioventus or generate 23.02% return on investment over 90 days.

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

Enhabit  vs.  Bioventus

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Bioventus

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bioventus are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Bioventus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enhabit and Bioventus

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

The idea behind Enhabit and Bioventus 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.