Correlation Between HealthEquity and Evolent Health

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

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

Diversification Opportunities for HealthEquity and Evolent Health

-0.94

Correlation Coefficient

HealthEquity  Evolent Health

Pay attention - limited upside

The 3 months correlation between HealthEquity and Evolent is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding HealthEquity and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health and HealthEquity 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 HealthEquity are associated (or correlated) with Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of HealthEquity i.e., HealthEquity and Evolent Health go up and down completely randomly.

Pair Corralation between HealthEquity and Evolent Health

Considering the 90-day investment horizon HealthEquity is expected to generate 0.33 times more return on investment than Evolent Health. However, HealthEquity is 3.01 times less risky than Evolent Health. It trades about 0.2 of its potential returns per unit of risk. Evolent Health is currently generating about -0.16 per unit of risk. If you would invest  7,863  in HealthEquity on August 31, 2024 and sell it today you would earn a total of  2,384  from holding HealthEquity or generate 30.32% return on investment over 90 days.

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

HealthEquity  vs.  Evolent Health

HealthEquity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, HealthEquity showed solid returns over the last few months and may actually be approaching a breakup point.

Evolent Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolent Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HealthEquity and Evolent Health

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

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