Correlation Between Ensign and Tenet Healthcare

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

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

Diversification Opportunities for Ensign and Tenet Healthcare

0.23

Correlation Coefficient

Ensign  Tenet Healthcare

Modest diversification

The 3 months correlation between Ensign and Tenet is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group and Tenet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Healthcare and Ensign 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 The Ensign Group are associated (or correlated) with Tenet Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenet Healthcare has no effect on the direction of Ensign i.e., Ensign and Tenet Healthcare go up and down completely randomly.

Pair Corralation between Ensign and Tenet Healthcare

Given the investment horizon of 90 days The Ensign Group is expected to generate 0.46 times more return on investment than Tenet Healthcare. However, The Ensign Group is 2.15 times less risky than Tenet Healthcare. It trades about -0.01 of its potential returns per unit of risk. Tenet Healthcare is currently generating about -0.05 per unit of risk. If you would invest  14,805  in The Ensign Group on August 31, 2024 and sell it today you would lose (207.00) from holding The Ensign Group or give up 1.4% of portfolio value over 90 days.

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

The Ensign Group  vs.  Tenet Healthcare

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 nearly stable basic indicators, Ensign is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tenet Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenet Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ensign and Tenet Healthcare

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

The idea behind The Ensign Group and Tenet Healthcare 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.