Correlation Between Kforce and HealthEquity

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

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

Diversification Opportunities for Kforce and HealthEquity

0.09

Correlation Coefficient

Kforce  HealthEquity

Significant diversification

The 3 months correlation between Kforce and HealthEquity is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Kforce Inc and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity and Kforce 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 Kforce Inc are associated (or correlated) with HealthEquity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthEquity has no effect on the direction of Kforce i.e., Kforce and HealthEquity go up and down completely randomly.

Pair Corralation between Kforce and HealthEquity

Given the investment horizon of 90 days Kforce Inc is expected to generate 0.74 times more return on investment than HealthEquity. However, Kforce Inc is 1.36 times less risky than HealthEquity. It trades about 0.13 of its potential returns per unit of risk. HealthEquity is currently generating about -0.2 per unit of risk. If you would invest  5,799  in Kforce Inc on September 17, 2024 and sell it today you would earn a total of  179.00  from holding Kforce Inc or generate 3.09% return on investment over 90 days.

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

Kforce Inc  vs.  HealthEquity

Kforce Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kforce is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

HealthEquity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, HealthEquity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kforce and HealthEquity

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

The idea behind Kforce Inc and HealthEquity 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.