Correlation Between Grand Canyon and HealthEquity

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

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

Diversification Opportunities for Grand Canyon and HealthEquity

0.62

Correlation Coefficient

Grand Canyon  HealthEquity

Poor diversification

The 3 months correlation between Grand and HealthEquity is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and HealthEquity go up and down completely randomly.

Pair Corralation between Grand Canyon and HealthEquity

Given the investment horizon of 90 days Grand Canyon Education is expected to generate 0.46 times more return on investment than HealthEquity. However, Grand Canyon Education is 2.16 times less risky than HealthEquity. It trades about 0.09 of its potential returns per unit of risk. HealthEquity is currently generating about -0.04 per unit of risk. If you would invest  16,380  in Grand Canyon Education on December 31, 2024 and sell it today you would earn a total of  1,114  from holding Grand Canyon Education or generate 6.8% return on investment over 90 days.

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

Grand Canyon Education  vs.  HealthEquity

Grand Canyon Education

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Grand Canyon may actually be approaching a critical reversion point that can send shares even higher in May 2025.

HealthEquity

Risk-Adjusted Performance

Very Weak

Over the last 90 days HealthEquity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Grand Canyon and HealthEquity

The main advantage of trading using opposite Grand Canyon and HealthEquity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.