Correlation Between Definitive Healthcare and Level

Can any of the company-specific risk be diversified away by investing in both Definitive Healthcare and Level 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 Level 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 Level 3 Financing, you can compare the effects of market volatilities on Definitive Healthcare and Level 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 Level. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definitive Healthcare and Level.

Diversification Opportunities for Definitive Healthcare and Level

0.28

Correlation Coefficient

Definitive Healthcare  Level

Modest diversification

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

Pair Corralation between Definitive Healthcare and Level

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to generate 0.07 times more return on investment than Level. However, Definitive Healthcare Corp is 14.91 times less risky than Level. It trades about -0.12 of its potential returns per unit of risk. Level 3 Financing is currently generating about -0.24 per unit of risk. If you would invest  470.00  in Definitive Healthcare Corp on October 9, 2024 and sell it today you would lose (27.00) from holding Definitive Healthcare Corp or give up 5.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	21.05%
Values	Daily Returns

Definitive Healthcare Corp  vs.  Level 3 Financing

Definitive Healthcare

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 2 (%) 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.

Level 3 Financing

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Level 3 Financing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Level 3 Financing investors.

Pair Trading with Definitive Healthcare and Level

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

The idea behind Definitive Healthcare Corp and Level 3 Financing 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 Transaction History module to view history of all your transactions and understand their impact on performance.