Correlation Between Select Medical and InnovAge Holding

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

Diversification Opportunities for Select Medical and InnovAge Holding

-0.07

Correlation Coefficient

Select Medical  InnovAge Holding

Good diversification

The 3 months correlation between Select and InnovAge is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and InnovAge Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnovAge Holding Corp 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 InnovAge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnovAge Holding Corp has no effect on the direction of Select Medical i.e., Select Medical and InnovAge Holding go up and down completely randomly.

Pair Corralation between Select Medical and InnovAge Holding

Considering the 90-day investment horizon Select Medical is expected to generate 1.53 times less return on investment than InnovAge Holding. But when comparing it to its historical volatility, Select Medical Holdings is 4.09 times less risky than InnovAge Holding. It trades about 0.22 of its potential returns per unit of risk. InnovAge Holding Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  432.00  in InnovAge Holding Corp on March 7, 2024 and sell it today you would earn a total of  30.00  from holding InnovAge Holding Corp or generate 6.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Select Medical Holdings  vs.  InnovAge Holding Corp

Select Medical Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Select Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

InnovAge Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnovAge Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, InnovAge Holding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Select Medical and InnovAge Holding

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

The idea behind Select Medical Holdings and InnovAge Holding 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.