Correlation Between HEALTHSTREAM (HL5SG) and Yamaha

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

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

Diversification Opportunities for HEALTHSTREAM (HL5SG) and Yamaha

-0.77

Correlation Coefficient

HEALTHSTREAM (HL5SG)  Yamaha

Pay attention - limited upside

The 3 months correlation between HEALTHSTREAM and Yamaha is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and Yamaha go up and down completely randomly.

Pair Corralation between HEALTHSTREAM (HL5SG) and Yamaha

Assuming the 90 days trading horizon HEALTHSTREAM is expected to generate 0.62 times more return on investment than Yamaha. However, HEALTHSTREAM is 1.61 times less risky than Yamaha. It trades about 0.17 of its potential returns per unit of risk. Yamaha is currently generating about -0.08 per unit of risk. If you would invest  2,577  in HEALTHSTREAM on October 24, 2024 and sell it today you would earn a total of  443.00  from holding HEALTHSTREAM or generate 17.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

HEALTHSTREAM  vs.  Yamaha

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.

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HEALTHSTREAM (HL5SG) and Yamaha

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

The idea behind HEALTHSTREAM and Yamaha 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.