Correlation Between HealthStream and CareMax

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

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

Diversification Opportunities for HealthStream and CareMax

-0.58

Correlation Coefficient

HealthStream  CareMax

Excellent diversification

The 3 months correlation between HealthStream and CareMax is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and CareMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareMax 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 CareMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareMax has no effect on the direction of HealthStream i.e., HealthStream and CareMax go up and down completely randomly.

Pair Corralation between HealthStream and CareMax

Given the investment horizon of 90 days HealthStream is expected to generate 0.16 times more return on investment than CareMax. However, HealthStream is 6.43 times less risky than CareMax. It trades about 0.15 of its potential returns per unit of risk. CareMax is currently generating about -0.17 per unit of risk. If you would invest  2,863  in HealthStream on September 4, 2024 and sell it today you would earn a total of  453.00  from holding HealthStream or generate 15.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

HealthStream  vs.  CareMax

HealthStream

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 11 (%) 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.

CareMax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareMax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HealthStream and CareMax

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

The idea behind HealthStream and CareMax 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 CEOs Directory module to screen CEOs from public companies around the world.