Correlation Between Definitive Healthcare and ResMed

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

Diversification Opportunities for Definitive Healthcare and ResMed

0.28

Correlation Coefficient

Definitive Healthcare  ResMed

Modest diversification

The 3 months correlation between Definitive and ResMed is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and ResMed go up and down completely randomly.

Pair Corralation between Definitive Healthcare and ResMed

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the ResMed. In addition to that, Definitive Healthcare is 1.69 times more volatile than ResMed Inc. It trades about -0.03 of its total potential returns per unit of risk. ResMed Inc is currently generating about 0.02 per unit of volatility. If you would invest  20,496  in ResMed Inc on September 27, 2024 and sell it today you would earn a total of  2,892  from holding ResMed Inc or generate 14.11% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  ResMed Inc

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 newest stock price confusion, may contribute to short-horizon losses for the traders.

ResMed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Definitive Healthcare and ResMed

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

The idea behind Definitive Healthcare Corp and ResMed Inc 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.