Correlation Between Select Medical and Medical Facilities

Can any of the company-specific risk be diversified away by investing in both Select Medical and Medical Facilities 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 Medical Facilities 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 Medical Facilities, you can compare the effects of market volatilities on Select Medical and Medical Facilities 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 Medical Facilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Medical Facilities.

Diversification Opportunities for Select Medical and Medical Facilities

0.57

Correlation Coefficient

Select Medical  Medical Facilities

Very weak diversification

The 3 months correlation between Select and Medical is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Select Medical i.e., Select Medical and Medical Facilities go up and down completely randomly.

Pair Corralation between Select Medical and Medical Facilities

Considering the 90-day investment horizon Select Medical is expected to generate 3.52 times less return on investment than Medical Facilities. In addition to that, Select Medical is 1.35 times more volatile than Medical Facilities. It trades about 0.02 of its total potential returns per unit of risk. Medical Facilities is currently generating about 0.07 per unit of volatility. If you would invest  1,012  in Medical Facilities on September 24, 2024 and sell it today you would earn a total of  78.00  from holding Medical Facilities or generate 7.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Select Medical Holdings  vs.  Medical Facilities

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.

Medical Facilities

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Select Medical and Medical Facilities

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

The idea behind Select Medical Holdings and Medical Facilities 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.