Correlation Between HealthStream and Health Catalyst

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

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

Diversification Opportunities for HealthStream and Health Catalyst

0.22

Correlation Coefficient

HealthStream  Health Catalyst

Modest diversification

The 3 months correlation between HealthStream and Health is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Health Catalyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Catalyst 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 Health Catalyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Catalyst has no effect on the direction of HealthStream i.e., HealthStream and Health Catalyst go up and down completely randomly.

Pair Corralation between HealthStream and Health Catalyst

Given the investment horizon of 90 days HealthStream is expected to generate 1.39 times less return on investment than Health Catalyst. But when comparing it to its historical volatility, HealthStream is 1.92 times less risky than Health Catalyst. It trades about 0.14 of its potential returns per unit of risk. Health Catalyst is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  725.00  in Health Catalyst on August 31, 2024 and sell it today you would earn a total of  140.00  from holding Health Catalyst or generate 19.31% return on investment over 90 days.

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

HealthStream  vs.  Health Catalyst

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.

Health Catalyst

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Health Catalyst are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Health Catalyst unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HealthStream and Health Catalyst

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

The idea behind HealthStream and Health Catalyst 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.