Correlation Between HealthStream and CareCloud

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

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

Diversification Opportunities for HealthStream and CareCloud

0.84

Correlation Coefficient

HealthStream  CareCloud

Very poor diversification

The 3 months correlation between HealthStream and CareCloud is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and CareCloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareCloud and HealthStream 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 CareCloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareCloud has no effect on the direction of HealthStream i.e., HealthStream and CareCloud go up and down completely randomly.

Pair Corralation between HealthStream and CareCloud

Given the investment horizon of 90 days HealthStream is expected to generate 2.49 times less return on investment than CareCloud. But when comparing it to its historical volatility, HealthStream is 2.96 times less risky than CareCloud. It trades about 0.15 of its potential returns per unit of risk. CareCloud is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,295  in CareCloud on September 12, 2024 and sell it today you would earn a total of  525.00  from holding CareCloud or generate 40.54% return on investment over 90 days.

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

HealthStream  vs.  CareCloud

HealthStream

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, HealthStream displayed solid returns over the last few months and may actually be approaching a breakup point.

CareCloud

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CareCloud are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, CareCloud displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HealthStream and CareCloud

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

The idea behind HealthStream and CareCloud 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..