Correlation Between Garofalo Health and HEALTHSTREAM (HL5SG)

Can any of the company-specific risk be diversified away by investing in both Garofalo Health and HEALTHSTREAM (HL5SG) 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 Garofalo Health and HEALTHSTREAM (HL5SG) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garofalo Health Care and HEALTHSTREAM, you can compare the effects of market volatilities on Garofalo Health and HEALTHSTREAM (HL5SG) 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 Garofalo Health with a short position of HEALTHSTREAM (HL5SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Garofalo Health and HEALTHSTREAM (HL5SG).

Diversification Opportunities for Garofalo Health and HEALTHSTREAM (HL5SG)

0.18

Correlation Coefficient

Garofalo Health  HEALTHSTREAM (HL5SG)

Average diversification

The 3 months correlation between Garofalo and HEALTHSTREAM is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Garofalo Health Care and HEALTHSTREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHSTREAM (HL5SG) and Garofalo 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 Garofalo Health Care are associated (or correlated) with HEALTHSTREAM (HL5SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHSTREAM (HL5SG) has no effect on the direction of Garofalo Health i.e., Garofalo Health and HEALTHSTREAM (HL5SG) go up and down completely randomly.

Pair Corralation between Garofalo Health and HEALTHSTREAM (HL5SG)

Assuming the 90 days horizon Garofalo Health Care is expected to under-perform the HEALTHSTREAM (HL5SG). But the stock apears to be less risky and, when comparing its historical volatility, Garofalo Health Care is 1.12 times less risky than HEALTHSTREAM (HL5SG). The stock trades about -0.12 of its potential returns per unit of risk. The HEALTHSTREAM is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,057  in HEALTHSTREAM on December 26, 2024 and sell it today you would lose (177.00) from holding HEALTHSTREAM or give up 5.79% of portfolio value over 90 days.

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

Garofalo Health Care  vs.  HEALTHSTREAM

Garofalo Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHSTREAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEALTHSTREAM (HL5SG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Garofalo Health and HEALTHSTREAM (HL5SG)

The main advantage of trading using opposite Garofalo Health and HEALTHSTREAM (HL5SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garofalo Health position performs unexpectedly, HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) will offset losses from the drop in HEALTHSTREAM (HL5SG)'s long position.

The idea behind Garofalo Health Care and HEALTHSTREAM 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.