Correlation Between HEALTHSTREAM (HL5SG) and FLOW TRADERS

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

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

Diversification Opportunities for HEALTHSTREAM (HL5SG) and FLOW TRADERS

0.3

Correlation Coefficient

HEALTHSTREAM (HL5SG)  FLOW TRADERS

Weak diversification

The 3 months correlation between HEALTHSTREAM and FLOW is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD and HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM are associated (or correlated) with FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and FLOW TRADERS go up and down completely randomly.

Pair Corralation between HEALTHSTREAM (HL5SG) and FLOW TRADERS

Assuming the 90 days trading horizon HEALTHSTREAM (HL5SG) is expected to generate 32.75 times less return on investment than FLOW TRADERS. But when comparing it to its historical volatility, HEALTHSTREAM is 1.17 times less risky than FLOW TRADERS. It trades about 0.01 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,100  in FLOW TRADERS LTD on October 11, 2024 and sell it today you would earn a total of  74.00  from holding FLOW TRADERS LTD or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

HEALTHSTREAM  vs.  FLOW TRADERS LTD

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HEALTHSTREAM are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, HEALTHSTREAM (HL5SG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

FLOW TRADERS LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FLOW TRADERS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HEALTHSTREAM (HL5SG) and FLOW TRADERS

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

The idea behind HEALTHSTREAM and FLOW TRADERS LTD 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.