Correlation Between Fresenius and Regional Health

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

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

Diversification Opportunities for Fresenius and Regional Health

0.64

Correlation Coefficient

Fresenius  Regional Health

Poor diversification

The 3 months correlation between Fresenius and Regional is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop and Fresenius 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 SE Co are associated (or correlated) with Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Fresenius i.e., Fresenius and Regional Health go up and down completely randomly.

Pair Corralation between Fresenius and Regional Health

Assuming the 90 days horizon Fresenius SE Co is expected to under-perform the Regional Health. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fresenius SE Co is 5.63 times less risky than Regional Health. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Regional Health Properties is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Regional Health Properties on August 31, 2024 and sell it today you would lose (16.00) from holding Regional Health Properties or give up 8.6% of portfolio value over 90 days.

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

Fresenius SE Co  vs.  Regional Health Properties

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Regional Health Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Regional Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fresenius and Regional Health

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

The idea behind Fresenius SE Co and Regional Health Properties 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.