Correlation Between Definitive Healthcare and Simulations Plus

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

Diversification Opportunities for Definitive Healthcare and Simulations Plus

0.8

Correlation Coefficient

Definitive Healthcare  Simulations Plus

Very poor diversification

The 3 months correlation between Definitive and Simulations is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and Simulations Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simulations Plus 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 Simulations Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simulations Plus has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and Simulations Plus go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Simulations Plus

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the Simulations Plus. In addition to that, Definitive Healthcare is 2.08 times more volatile than Simulations Plus. It trades about -0.06 of its total potential returns per unit of risk. Simulations Plus is currently generating about -0.06 per unit of volatility. If you would invest  2,789  in Simulations Plus on December 31, 2024 and sell it today you would lose (360.00) from holding Simulations Plus or give up 12.91% of portfolio value over 90 days.

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

Definitive Healthcare Corp  vs.  Simulations Plus

Definitive Healthcare

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Simulations Plus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simulations Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Definitive Healthcare and Simulations Plus

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

The idea behind Definitive Healthcare Corp and Simulations Plus 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.