Correlation Between Sight Sciences and Encompass Health

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

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

Diversification Opportunities for Sight Sciences and Encompass Health

0.72

Correlation Coefficient

Sight Sciences  Encompass Health

Poor diversification

The 3 months correlation between Sight and Encompass is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sight Sciences 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 Sight Sciences 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 Sight Sciences 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 Sight Sciences i.e., Sight Sciences and Encompass Health go up and down completely randomly.

Pair Corralation between Sight Sciences and Encompass Health

Given the investment horizon of 90 days Sight Sciences is expected to generate 3.38 times more return on investment than Encompass Health. However, Sight Sciences is 3.38 times more volatile than Encompass Health Corp. It trades about 0.25 of its potential returns per unit of risk. Encompass Health Corp is currently generating about 0.01 per unit of risk. If you would invest  582.00  in Sight Sciences on March 7, 2024 and sell it today you would earn a total of  125.00  from holding Sight Sciences or generate 21.48% return on investment over 90 days.

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

Sight Sciences  vs.  Encompass Health Corp

Sight Sciences

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sight Sciences are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Sight Sciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 abnormal technical indicators, Encompass Health may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Sight Sciences and Encompass Health

The main advantage of trading using opposite Sight Sciences and Encompass Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sight Sciences 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 Sight Sciences 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.