Correlation Between HealthStream and MSP Recovery

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

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

Diversification Opportunities for HealthStream and MSP Recovery

-0.73

Correlation Coefficient

HealthStream  MSP Recovery

Pay attention - limited upside

The 3 months correlation between HealthStream and MSP is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of HealthStream i.e., HealthStream and MSP Recovery go up and down completely randomly.

Pair Corralation between HealthStream and MSP Recovery

Given the investment horizon of 90 days HealthStream is expected to generate 0.09 times more return on investment than MSP Recovery. However, HealthStream is 11.46 times less risky than MSP Recovery. It trades about 0.05 of its potential returns per unit of risk. MSP Recovery is currently generating about -0.02 per unit of risk. If you would invest  2,463  in HealthStream on September 2, 2024 and sell it today you would earn a total of  847.00  from holding HealthStream or generate 34.39% return on investment over 90 days.

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

HealthStream  vs.  MSP Recovery

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.

MSP Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with HealthStream and MSP Recovery

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

The idea behind HealthStream and MSP Recovery 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.