Correlation Between Definitive Healthcare and LivaNova PLC

Can any of the company-specific risk be diversified away by investing in both Definitive Healthcare and LivaNova PLC 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 LivaNova PLC 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 LivaNova PLC, you can compare the effects of market volatilities on Definitive Healthcare and LivaNova PLC 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 LivaNova PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definitive Healthcare and LivaNova PLC.

Diversification Opportunities for Definitive Healthcare and LivaNova PLC

0.29

Correlation Coefficient

Definitive Healthcare  LivaNova PLC

Modest diversification

The 3 months correlation between Definitive and LivaNova is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC 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 LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and LivaNova PLC go up and down completely randomly.

Pair Corralation between Definitive Healthcare and LivaNova PLC

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the LivaNova PLC. In addition to that, Definitive Healthcare is 1.68 times more volatile than LivaNova PLC. It trades about -0.06 of its total potential returns per unit of risk. LivaNova PLC is currently generating about 0.0 per unit of volatility. If you would invest  4,860  in LivaNova PLC on October 2, 2024 and sell it today you would lose (248.00) from holding LivaNova PLC or give up 5.1% of portfolio value over 90 days.

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

Definitive Healthcare Corp  vs.  LivaNova PLC

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

LivaNova PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LivaNova PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Definitive Healthcare and LivaNova PLC

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

The idea behind Definitive Healthcare Corp and LivaNova PLC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.