Correlation Between HealthEquity and Solventum Corp

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

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

Diversification Opportunities for HealthEquity and Solventum Corp

0.36

Correlation Coefficient

HealthEquity  Solventum Corp

Weak diversification

The 3 months correlation between HealthEquity and Solventum is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding HealthEquity and Solventum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solventum Corp 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 Solventum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solventum Corp has no effect on the direction of HealthEquity i.e., HealthEquity and Solventum Corp go up and down completely randomly.

Pair Corralation between HealthEquity and Solventum Corp

Considering the 90-day investment horizon HealthEquity is expected to generate 1.48 times more return on investment than Solventum Corp. However, HealthEquity is 1.48 times more volatile than Solventum Corp. It trades about 0.19 of its potential returns per unit of risk. Solventum Corp is currently generating about 0.12 per unit of risk. If you would invest  7,863  in HealthEquity on September 3, 2024 and sell it today you would earn a total of  2,291  from holding HealthEquity or generate 29.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HealthEquity  vs.  Solventum Corp

HealthEquity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 14 (%) 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.

Solventum Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solventum Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Solventum Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HealthEquity and Solventum Corp

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

The idea behind HealthEquity and Solventum Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.