Correlation Between Evolent Health and CareMax

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

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

Diversification Opportunities for Evolent Health and CareMax

0.78

Correlation Coefficient

Evolent Health  CareMax

Poor diversification

The 3 months correlation between Evolent and CareMax is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and CareMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareMax and Evolent 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 Evolent Health are associated (or correlated) with CareMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareMax has no effect on the direction of Evolent Health i.e., Evolent Health and CareMax go up and down completely randomly.

Pair Corralation between Evolent Health and CareMax

Considering the 90-day investment horizon Evolent Health is expected to under-perform the CareMax. But the stock apears to be less risky and, when comparing its historical volatility, Evolent Health is 8.91 times less risky than CareMax. The stock trades about -0.04 of its potential returns per unit of risk. The CareMax is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1.30  in CareMax on December 29, 2024 and sell it today you would lose (1.29) from holding CareMax or give up 99.23% of portfolio value over 90 days.

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

Evolent Health  vs.  CareMax

Evolent Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolent Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

CareMax

Risk-Adjusted Performance

OK

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

Pair Trading with Evolent Health and CareMax

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

The idea behind Evolent Health and CareMax 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.