Correlation Between Option Care and Enhabit

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

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

Diversification Opportunities for Option Care and Enhabit

0.7

Correlation Coefficient

Option Care  Enhabit

Poor diversification

The 3 months correlation between Option and Enhabit is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit and Option Care 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 Option Care Health are associated (or correlated) with Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Option Care i.e., Option Care and Enhabit go up and down completely randomly.

Pair Corralation between Option Care and Enhabit

Given the investment horizon of 90 days Option Care Health is expected to under-perform the Enhabit. But the stock apears to be less risky and, when comparing its historical volatility, Option Care Health is 2.19 times less risky than Enhabit. The stock trades about -0.12 of its potential returns per unit of risk. The Enhabit is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,042  in Enhabit on March 12, 2024 and sell it today you would lose (123.00) from holding Enhabit or give up 11.8% of portfolio value over 90 days.

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

Option Care Health  vs.  Enhabit

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Enhabit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enhabit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite 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 Option Care and Enhabit

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

The idea behind Option Care Health and Enhabit 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.