Correlation Between Elevance Health and Bright Health

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

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

Diversification Opportunities for Elevance Health and Bright Health

0.0

Correlation Coefficient

Elevance Health  Bright Health

Pay attention - limited upside

The 3 months correlation between Elevance and Bright is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and Bright Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Health Group and Elevance Health 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 Elevance Health are associated (or correlated) with Bright Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Health Group has no effect on the direction of Elevance Health i.e., Elevance Health and Bright Health go up and down completely randomly.

Pair Corralation between Elevance Health and Bright Health

If you would invest  36,726  in Elevance Health on December 29, 2024 and sell it today you would earn a total of  6,474  from holding Elevance Health or generate 17.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Elevance Health  vs.  Bright Health Group

Elevance Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elevance Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, Elevance Health showed solid returns over the last few months and may actually be approaching a breakup point.

Bright Health Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Health Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Bright Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Elevance Health and Bright Health

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

The idea behind Elevance Health and Bright Health 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.