Correlation Between HealthEquity and Newtopia

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

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

Diversification Opportunities for HealthEquity and Newtopia

-0.34

Correlation Coefficient

HealthEquity  Newtopia

Very good diversification

The 3 months correlation between HealthEquity and Newtopia is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HealthEquity and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia 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 Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of HealthEquity i.e., HealthEquity and Newtopia go up and down completely randomly.

Pair Corralation between HealthEquity and Newtopia

Considering the 90-day investment horizon HealthEquity is expected to under-perform the Newtopia. But the stock apears to be less risky and, when comparing its historical volatility, HealthEquity is 6.8 times less risky than Newtopia. The stock trades about -0.04 of its potential returns per unit of risk. The Newtopia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Newtopia on December 30, 2024 and sell it today you would lose (0.09) from holding Newtopia or give up 64.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

HealthEquity  vs.  Newtopia

HealthEquity

Risk-Adjusted Performance

Very Weak

Over the last 90 days HealthEquity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Newtopia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtopia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtopia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HealthEquity and Newtopia

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

The idea behind HealthEquity and Newtopia 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.