Correlation Between Select Medical and Fresenius

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

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

Diversification Opportunities for Select Medical and Fresenius

-0.58

Correlation Coefficient

Select Medical  Fresenius

Excellent diversification

The 3 months correlation between Select and Fresenius is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE and Select Medical 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 Select Medical Holdings are associated (or correlated) with Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Select Medical i.e., Select Medical and Fresenius go up and down completely randomly.

Pair Corralation between Select Medical and Fresenius

Considering the 90-day investment horizon Select Medical Holdings is expected to generate 2.02 times more return on investment than Fresenius. However, Select Medical is 2.02 times more volatile than Fresenius SE Co. It trades about 0.02 of its potential returns per unit of risk. Fresenius SE Co is currently generating about -0.09 per unit of risk. If you would invest  1,894  in Select Medical Holdings on September 24, 2024 and sell it today you would earn a total of  12.00  from holding Select Medical Holdings or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Select Medical Holdings  vs.  Fresenius SE Co

Select Medical Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Select Medical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Select Medical and Fresenius

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

The idea behind Select Medical Holdings and Fresenius SE Co 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.