Correlation Between HEALTHSTREAM (HL5SG) and American Shipping

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

By analyzing existing cross correlation between HEALTHSTREAM and American Shipping, you can compare the effects of market volatilities on HEALTHSTREAM (HL5SG) and American Shipping 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 American Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEALTHSTREAM (HL5SG) and American Shipping.

Diversification Opportunities for HEALTHSTREAM (HL5SG) and American Shipping

0.96

Correlation Coefficient

HEALTHSTREAM (HL5SG)  American Shipping

Almost no diversification

The 3 months correlation between HEALTHSTREAM and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping 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 American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and American Shipping go up and down completely randomly.

Pair Corralation between HEALTHSTREAM (HL5SG) and American Shipping

Assuming the 90 days trading horizon HEALTHSTREAM is expected to generate 0.81 times more return on investment than American Shipping. However, HEALTHSTREAM is 1.24 times less risky than American Shipping. It trades about 0.01 of its potential returns per unit of risk. American Shipping is currently generating about -0.06 per unit of risk. If you would invest  3,040  in HEALTHSTREAM on October 10, 2024 and sell it today you would earn a total of  0.00  from holding HEALTHSTREAM or generate 0.0% return on investment over 90 days.

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

HEALTHSTREAM  vs.  American Shipping

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 unsteady basic indicators, HEALTHSTREAM (HL5SG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Shipping

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, American Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEALTHSTREAM (HL5SG) and American Shipping

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

The idea behind HEALTHSTREAM and American Shipping 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.