Correlation Between Equifax and Healthcare Services

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

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

Diversification Opportunities for Equifax and Healthcare Services

0.42

Correlation Coefficient

Equifax  Healthcare Services

Very weak diversification

The 3 months correlation between Equifax and Healthcare is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Healthcare Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Services and Equifax 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 Equifax are associated (or correlated) with Healthcare Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Services has no effect on the direction of Equifax i.e., Equifax and Healthcare Services go up and down completely randomly.

Pair Corralation between Equifax and Healthcare Services

Considering the 90-day investment horizon Equifax is expected to generate 1.11 times more return on investment than Healthcare Services. However, Equifax is 1.11 times more volatile than Healthcare Services Group. It trades about -0.05 of its potential returns per unit of risk. Healthcare Services Group is currently generating about -0.15 per unit of risk. If you would invest  26,114  in Equifax on November 29, 2024 and sell it today you would lose (1,752) from holding Equifax or give up 6.71% of portfolio value over 90 days.

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

Equifax  vs.  Healthcare Services Group

Equifax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Equifax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Healthcare Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Services Group 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 basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Equifax and Healthcare Services

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

The idea behind Equifax and Healthcare Services Group 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.