Correlation Between HealthEquity and Spok Holdings

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

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

Diversification Opportunities for HealthEquity and Spok Holdings

0.85

Correlation Coefficient

HealthEquity  Spok Holdings

Very poor diversification

The 3 months correlation between HealthEquity and Spok is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HealthEquity and Spok Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spok Holdings 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 Spok Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spok Holdings has no effect on the direction of HealthEquity i.e., HealthEquity and Spok Holdings go up and down completely randomly.

Pair Corralation between HealthEquity and Spok Holdings

Considering the 90-day investment horizon HealthEquity is expected to generate 1.67 times more return on investment than Spok Holdings. However, HealthEquity is 1.67 times more volatile than Spok Holdings. It trades about 0.19 of its potential returns per unit of risk. Spok Holdings is currently generating about 0.16 per unit of risk. If you would invest  7,863  in HealthEquity on September 2, 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	Strong
Accuracy	100.0%
Values	Daily Returns

HealthEquity  vs.  Spok Holdings

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.

Spok Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spok Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Spok Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HealthEquity and Spok Holdings

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

The idea behind HealthEquity and Spok Holdings 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.