Correlation Between Certara and American Well

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

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

Diversification Opportunities for Certara and American Well

0.94

Correlation Coefficient

Certara  American Well

Almost no diversification

The 3 months correlation between Certara and American is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Certara and American Well Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Well Corp and Certara 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 Certara are associated (or correlated) with American Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Well Corp has no effect on the direction of Certara i.e., Certara and American Well go up and down completely randomly.

Pair Corralation between Certara and American Well

Given the investment horizon of 90 days Certara is expected to under-perform the American Well. But the stock apears to be less risky and, when comparing its historical volatility, Certara is 1.76 times less risky than American Well. The stock trades about -0.02 of its potential returns per unit of risk. The American Well Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  747.00  in American Well Corp on December 30, 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Certara  vs.  American Well Corp

Certara

Risk-Adjusted Performance

Very Weak

Over the last 90 days Certara has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Certara is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Certara and American Well

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

The idea behind Certara and American Well 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.