Correlation Between P3 Health and Encompass Health

Can any of the company-specific risk be diversified away by investing in both P3 Health and Encompass 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 P3 Health and Encompass Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between P3 Health Partners and Encompass Health Corp, you can compare the effects of market volatilities on P3 Health and Encompass 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 P3 Health with a short position of Encompass Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of P3 Health and Encompass Health.

Diversification Opportunities for P3 Health and Encompass Health

-0.6

Correlation Coefficient

P3 Health  Encompass Health

Excellent diversification

The 3 months correlation between PIIIW and Encompass is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding P3 Health Partners and Encompass Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass Health Corp and P3 Health 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 P3 Health Partners are associated (or correlated) with Encompass Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Health Corp has no effect on the direction of P3 Health i.e., P3 Health and Encompass Health go up and down completely randomly.

Pair Corralation between P3 Health and Encompass Health

Assuming the 90 days horizon P3 Health Partners is expected to under-perform the Encompass Health. In addition to that, P3 Health is 20.54 times more volatile than Encompass Health Corp. It trades about -0.15 of its total potential returns per unit of risk. Encompass Health Corp is currently generating about -0.09 per unit of volatility. If you would invest  10,261  in Encompass Health Corp on September 13, 2024 and sell it today you would lose (192.00) from holding Encompass Health Corp or give up 1.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	72.73%
Values	Daily Returns

P3 Health Partners  vs.  Encompass Health Corp

P3 Health Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days P3 Health Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Encompass Health Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Encompass Health Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Encompass Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with P3 Health and Encompass Health

The main advantage of trading using opposite P3 Health and Encompass Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if P3 Health position performs unexpectedly, Encompass 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 Encompass Health will offset losses from the drop in Encompass Health's long position.

The idea behind P3 Health Partners and Encompass Health Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.