Correlation Between Icad and HealthStream

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

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

Diversification Opportunities for Icad and HealthStream

0.73

Correlation Coefficient

Icad  HealthStream

Poor diversification

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

Pair Corralation between Icad and HealthStream

Given the investment horizon of 90 days icad inc is expected to generate 5.12 times more return on investment than HealthStream. However, Icad is 5.12 times more volatile than HealthStream. It trades about 0.06 of its potential returns per unit of risk. HealthStream is currently generating about 0.02 per unit of risk. If you would invest  192.00  in icad inc on December 29, 2024 and sell it today you would earn a total of  22.00  from holding icad inc or generate 11.46% return on investment over 90 days.

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

icad inc  vs.  HealthStream

icad inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in icad inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Icad exhibited solid returns over the last few months and may actually be approaching a breakup point.

HealthStream

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HealthStream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Icad and HealthStream

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

The idea behind icad inc and HealthStream 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.