SEM’s Historic Drawdowns Resurface as Bull‑HighVol Momentum Picks Up

Four risk flags signal heightened downside potential despite recent price gains

SEM Select Medical Holdings Corporation

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

Select Medical Holdings Corporation (SEM) — Return Performance

Select Medical Holdings Corporation (SEM) exhibited a mixed return profile over the past five years, delivering modest positive performance in the short term but underperforming its sector benchmark across most horizons. While the stock posted a 11.38% gain over six months and a 9.54% rise over one year, its alpha versus the XLV healthcare ETF was negative at -2.13% for one month, -2.83% for three months, but turned positive at +3.52% for six months before slipping back to -4.99% over twelve months. Longer horizons reveal pronounced underperformance, with a 5‑year total return of -21.72% and an alpha of -93.54%, indicating the stock has lagged its sector by a wide margin.

Period Returns vs S&P 500 & XLV

Monthly Returns Heatmap

SEM

The company generated positive alpha only in the six‑month window (+3.52%), suggesting a brief period of outperformance that may reflect temporary catalysts rather than sustained advantage. Short‑term returns were flat to slightly negative relative to the sector, while medium‑ and long‑term periods show consistent underperformance, highlighting a divergence between recent momentum and enduring weakness.

Returns Overview

Select Medical Holdings Corporation (SEM) — Return Charts

Volatility Analysis

Select Medical Holdings Corporation (SEM) — Volatility Profile

Select Medical Holdings Corporation (SEM) exhibits markedly higher price variability than the broader market, with an annualized volatility of 42.09% versus the S&P 500's 17.78%, indicating more than double the typical daily swings. The stock’s downside risk is pronounced: a downside deviation of 32.36% and a historical maximum drawdown of -60.24% over roughly eleven months (Feb‑2020 to Jan‑2021) underscore substantial loss potential during market stress. While recent short‑term volatility (2.3% over the past 60 days) sits below its long‑term average, the trailing 252‑day figure of 31.39% remains elevated relative to the historical mean, suggesting that risk has moderated but still exceeds benchmark levels.

Volatility Metrics

SEM

The company’s volatility profile is considerably more aggressive than the S&P 500, reflecting its sector exposure and earnings sensitivity. Downside deviation of 32.36% signals that negative returns are both frequent and severe, while the -60.24% max drawdown illustrates vulnerability to prolonged market downturns; the drawdown lasted nearly eleven months before a full recovery. The current 60‑day volatility of 2.3% is comfortably under the long‑term 252‑day average of 31.39%, indicating a temporary easing in price swings, yet the annualized figure remains well above the market benchmark.

SEM's annualized volatility (42.09%) is more than twice that of the S&P 500 (17.78%).
Downside deviation (32.36%) exceeds the overall volatility, highlighting greater sensitivity to negative moves.
The maximum drawdown of -60.24% persisted for nearly a year, revealing deep downside risk.
Short‑term (60‑day) volatility is lower than the trailing 252‑day average, suggesting a recent calm period.
Even with recent moderation, SEM’s long‑term volatility remains substantially higher than the market.

Positive Characteristics
Recent 60‑day volatility has fallen below the longer‑term average, indicating a potential reduction in short‑term risk.
The drawdown recovery completed in early 2021, showing that severe declines have historically been reversible for this stock.

Volatility Analysis

Select Medical Holdings Corporation (SEM) — Volatility & Drawdown Charts

Beta & Correlation

Select Medical Holdings Corporation (SEM) — Beta Profile

Select Medical Holdings Corporation exhibits a trailing beta of 1.199 versus the S&P 500, placing it at the upper edge of the market‑like range (0.8‑1.2). This indicates that, on average, the stock moves slightly more than the broader market in response to macro‑economic shocks, but it does not yet reach the aggressive threshold (>1.2). The upside beta of 1.083 versus a downside beta of 1.368 reveals pronounced asymmetry: the share tends to fall faster during market declines than it rises on gains, a characteristic that heightens downside risk for investors seeking capital preservation. The R‑squared of 0.257 and correlation of 0.506 suggest that roughly 25.7% of SEM’s price variance is explained by movements in the S&P 500, leaving about 74.3% driven by idiosyncratic factors. Consequently, the stock offers modest diversification benefits because a large portion of its risk is not tied to overall market dynamics. When benchmarked against the Healthcare sector (XLV), SEM’s sector beta of 1.11 and sector correlation of 0.442 imply that about 19.5% of its variance stems from sector‑specific forces, confirming that most of its systematic exposure originates from broader market influences rather than healthcare‑only drivers.

Beta & Correlation Metrics

SEM

The trailing beta of 1.199 signals near‑market sensitivity with a slight tilt toward higher volatility relative to the S&P 500. The asymmetric downside beta (1.368) exceeds the upside beta (1.083), indicating that the stock is more reactive to market declines, which may amplify losses in bearish environments. With an R‑squared of 0.257, only about a quarter of SEM’s price movements are explained by market factors, meaning investors benefit from substantial idiosyncratic risk that can be managed through diversification or active monitoring.

Trailing beta of 1.199 places SEM at the high end of the market‑like range, implying slightly higher than average market sensitivity.
Downside beta (1.368) exceeds upside beta (1.083), highlighting greater vulnerability during market downturns.
R‑squared of 0.257 indicates that roughly three‑quarters of price variance is idiosyncratic, offering diversification potential.
Systematic risk accounts for only 25.7% of total variance, while idiosyncratic risk dominates at 74.3%.
Sector beta (1.11) versus market beta (1.199) shows that most systematic exposure derives from broad market moves rather than sector‑specific dynamics.

Positive Characteristics
The stock’s high idiosyncratic component (74.3%) can provide diversification benefits in a multi‑asset portfolio.
Sector correlation of 0.442 suggests limited reliance on healthcare sector trends, reducing exposure to sector‑wide shocks.

Beta & Correlation

Select Medical Holdings Corporation (SEM) — Rolling Beta

Positive Notes

The stock’s high idiosyncratic component (74.3%) can provide diversification benefits in a multi‑asset portfolio.

Sector correlation of 0.442 suggests limited reliance on healthcare sector trends, reducing exposure to sector‑wide shocks.

Risk-Adjusted Returns

Select Medical Holdings Corporation (SEM) — Risk-Adjusted Performance

Select Medical Holdings Corporation (SEM) delivers modest risk-adjusted returns in the current market environment. The Sharpe ratio of 0.306 indicates that the stock generates a small excess return per unit of total volatility, well below the >1.0 threshold for attractive risk‑adjusted performance. However, the Sortino ratio of 0.398 exceeds the Sharpe figure, suggesting that downside volatility is lower than overall volatility and that the equity’s returns are less penalized by adverse price moves.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

SEM

The Calmar ratio of 0.274 reflects a relatively weak return‑to‑drawdown profile, implying that historical peak-to-trough losses have eroded much of the observed upside. An Information Ratio of 0.102 signals limited consistency in generating alpha above a benchmark, falling short of the >0.5 level typically associated with skilled active management. The Treynor ratio of 10.742, expressed as a percentage, translates to an annualized excess return of roughly 107.4% per unit of systematic risk (beta), which appears attractive but must be interpreted alongside the low Sharpe and Calmar figures that highlight overall volatility and drawdown concerns.

Sharpe ratio (0.306) is well below the desirable >1.0 level, indicating limited excess return for total risk taken.
Sortino ratio exceeds Sharpe, pointing to a more favorable downside risk profile relative to overall volatility.
Calmar ratio (0.274) signals that maximum historical drawdowns have been severe compared with average returns.
Information Ratio (0.102) suggests modest and inconsistent alpha generation.
Treynor ratio of 10.742 implies high excess return per unit of systematic risk, but this is offset by poor total‑risk metrics.

Positive Characteristics
The Sortino ratio surpasses the Sharpe ratio, indicating that downside volatility is relatively contained.
A high Treynor ratio reflects strong compensation for market (beta) exposure.

Risk-Adjusted Returns

Select Medical Holdings Corporation (SEM) — Rolling Sharpe & Sortino

Positive Notes

The Sortino ratio surpasses the Sharpe ratio, indicating that downside volatility is relatively contained.

A high Treynor ratio reflects strong compensation for market (beta) exposure.

Market Regime Analysis

Select Medical Holdings Corporation (SEM) — Regime Behavior

Select Medical Holdings Corporation (SEM) demonstrates pronounced sensitivity to market volatility regimes. In a Bull-HighVol environment, the stock delivers an average monthly return of 4.21%, markedly higher than its 1.68% performance in calmer Bull-LowVol periods, indicating that heightened equity momentum amplifies demand for SEM's healthcare services. Conversely, during Bear regimes the company suffers steep losses: -7.19% on average in Bear-LowVol months and a milder but still negative -1.97% in Bear-HighVol months, reflecting vulnerability to broader risk aversion despite its defensive sector positioning. The upside capture of 129.3% and downside capture of 139.3% yield a capture ratio of 0.93, signifying that while SEM participates strongly in market rallies, it also incurs proportionally larger losses when the market declines.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

SEM

In Bull-LowVol periods, SEM’s modest 1.68% average return suggests limited upside benefit from a stable uptrend, likely because lower volatility reduces discretionary spending on elective medical procedures that drive its revenue. The transition to Bull-HighVol sees returns jump to 4.21%, implying that investors allocate more capital to healthcare exposure amid broader market turbulence, enhancing SEM’s growth prospects. In Bear-LowVol months the stock drops sharply by -7.19%, indicating that even a calm declining market erodes demand for its services and pressures margins. However, in Bear-HighVol scenarios the loss narrows to -1.97%, hinting at some defensive cushioning as heightened volatility prompts investors to rotate into healthcare, partially offsetting downside pressure.

Market Regime Analysis

Select Medical Holdings Corporation (SEM) — Regime & Capture Charts

Regime Timeline

SEM outperforms in volatile uptrends, delivering over 4% average monthly returns in Bull-HighVol regimes.
The stock experiences the steepest declines during orderly bear markets (-7.19% avg), highlighting limited defensive characteristics.
Upside capture exceeds the market (129.3%) but downside capture is even higher (139.3%), resulting in a sub‑unity capture ratio of 0.93.
Current Bull-HighVol conditions favor SEM, aligning with its strongest historical regime performance.

Positive Characteristics
Strong upside participation during volatile bull markets suggests growth potential when equity risk appetite is high.
Downside losses are less severe in Bear-HighVol periods (-1.97%) compared to Bear-LowVol, indicating some resilience under stress.

Investment Highlights & Risk Summary

Select Medical Holdings Corporation (SEM) — Summary & Implications

Select Medical Holdings Corporation (SEM) delivered a modest 9.54% total return over the past year but lagged both the S&P 500 and its healthcare sector, generating an alpha of -9.46% versus the market and -4.99% versus XLV. The stock’s risk profile is pronounced: annualized volatility stands at 42.09%, beta is 1.199, and the maximum drawdown over the period reached -60.24%, indicating a high probability of substantial capital loss during adverse market moves. While upside capture exceeds the benchmark at 129.3%, downside capture is markedly higher at 139.3%, meaning SEM amplifies market declines more than it participates in gains; this asymmetry is reflected in a low Sharpe ratio of 0.306 and a modest Sortino of 0.398. Investors should weigh the potential for sector‑specific growth against the evident risk flags—high volatility, deep drawdowns, and an unfavorable capture profile—when considering SEM for a medium‑term (6‑18 month) allocation.

Summary Dashboard

Investment Highlights

Upside capture of 129.3% shows the company can participate strongly in market rallies, outpacing the healthcare sector when equities rise.
Beta of 1.199 indicates exposure slightly higher than the market, which may benefit from a bullish equity environment.
The stock’s absolute 1‑year return of 9.54% exceeds the risk‑free rate and provides a positive nominal gain despite broader underperformance.

Risk-Return Rankings

SEM HIGH

High volatility and deep drawdown dominate SEM’s profile, offsetting modest upside capture.

Strength: Strong upside capture (129.3%) relative to the sector.

Concern: Maximum drawdown of -60.24% signals severe downside risk.

Key Takeaways

SEM underperforms both the S&P 500 and its healthcare peer group, generating negative alpha on both fronts.
The Sharpe ratio of 0.306 suggests limited excess return per unit of total risk.
Downside capture of 139.3% means the stock loses more than the market in down markets, raising concern for risk‑averse investors.
High annualized volatility (42.09%) places SEM well above the S&P 500’s typical ~17% level, implying larger price swings.

PORTFOLIO IMPLICATIONS

Given its high beta and volatility, SEM may serve as a satellite position in portfolios seeking amplified exposure to healthcare upside during bullish cycles, but it should be balanced with lower‑volatility, higher‑Sharpe assets to temper overall risk. Investors with a moderate risk tolerance might limit SEM’s weight or pair it with defensive holdings that exhibit low downside capture, thereby smoothing the portfolio’s return path and reducing potential drawdowns.

SEM

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Report written 2026-06-07 • Finexus

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This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

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