Correlation Between Enhabit and Mid Atlantic

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

By analyzing existing cross correlation between Enhabit and Mid Atlantic Home Health, you can compare the effects of market volatilities on Enhabit and Mid Atlantic 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 Mid Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhabit and Mid Atlantic.

Diversification Opportunities for Enhabit and Mid Atlantic

0.0

Correlation Coefficient

Enhabit  Mid Atlantic

Pay attention - limited upside

The 3 months correlation between Enhabit and Mid is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and Mid Atlantic Home Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Atlantic Home 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 Mid Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Atlantic Home has no effect on the direction of Enhabit i.e., Enhabit and Mid Atlantic go up and down completely randomly.

Pair Corralation between Enhabit and Mid Atlantic

Given the investment horizon of 90 days Enhabit is expected to generate 1.38 times more return on investment than Mid Atlantic. However, Enhabit is 1.38 times more volatile than Mid Atlantic Home Health. It trades about -0.02 of its potential returns per unit of risk. Mid Atlantic Home Health is currently generating about -0.05 per unit of risk. If you would invest  1,369  in Enhabit on September 12, 2024 and sell it today you would lose (510.00) from holding Enhabit or give up 37.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.72%
Values	Daily Returns

Enhabit  vs.  Mid Atlantic Home Health

Enhabit

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mid Atlantic Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Atlantic Home Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Mid Atlantic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enhabit and Mid Atlantic

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

The idea behind Enhabit and Mid Atlantic Home Health 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.