Correlation Between American Well and Goodrx Holdings

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

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

Diversification Opportunities for American Well and Goodrx Holdings

0.76

Correlation Coefficient

American Well  Goodrx Holdings

Poor diversification

The 3 months correlation between American and Goodrx is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Well Corp and Goodrx Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodrx Holdings and American Well 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 American Well Corp are associated (or correlated) with Goodrx Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodrx Holdings has no effect on the direction of American Well i.e., American Well and Goodrx Holdings go up and down completely randomly.

Pair Corralation between American Well and Goodrx Holdings

Given the investment horizon of 90 days American Well Corp is expected to generate 1.75 times more return on investment than Goodrx Holdings. However, American Well is 1.75 times more volatile than Goodrx Holdings. It trades about 0.04 of its potential returns per unit of risk. Goodrx Holdings is currently generating about 0.01 per unit of risk. If you would invest  747.00  in American Well Corp on December 29, 2024 and sell it today you would earn a total of  35.00  from holding American Well Corp or generate 4.69% return on investment over 90 days.

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

American Well Corp  vs.  Goodrx Holdings

American Well Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Well Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, American Well disclosed solid returns over the last few months and may actually be approaching a breakup point.

Goodrx Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodrx Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Goodrx Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Well and Goodrx Holdings

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

The idea behind American Well Corp and Goodrx Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.