Correlation Between Definitive Healthcare and CareCloud

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

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

Diversification Opportunities for Definitive Healthcare and CareCloud

0.69

Correlation Coefficient

Definitive Healthcare  CareCloud

Poor diversification

The 3 months correlation between Definitive and CareCloud is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and CareCloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareCloud and Definitive Healthcare 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 Definitive Healthcare Corp are associated (or correlated) with CareCloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareCloud has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and CareCloud go up and down completely randomly.

Pair Corralation between Definitive Healthcare and CareCloud

Allowing for the 90-day total investment horizon Definitive Healthcare is expected to generate 14.59 times less return on investment than CareCloud. But when comparing it to its historical volatility, Definitive Healthcare Corp is 2.63 times less risky than CareCloud. It trades about 0.02 of its potential returns per unit of risk. CareCloud is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  275.00  in CareCloud on September 14, 2024 and sell it today you would earn a total of  120.00  from holding CareCloud or generate 43.64% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  CareCloud

Definitive Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

CareCloud

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CareCloud are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, CareCloud exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Definitive Healthcare and CareCloud

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

The idea behind Definitive Healthcare Corp and CareCloud 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.