Correlation Between Nextgen Healthcare and HealthStream

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

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

Diversification Opportunities for Nextgen Healthcare and HealthStream

-0.02

Correlation Coefficient

Nextgen Healthcare  HealthStream

Good diversification

The 3 months correlation between Nextgen and HealthStream is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nextgen Healthcare and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and Nextgen Healthcare 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 Nextgen Healthcare 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 Nextgen Healthcare i.e., Nextgen Healthcare and HealthStream go up and down completely randomly.

Pair Corralation between Nextgen Healthcare and HealthStream

If you would invest  2,866  in HealthStream on August 31, 2024 and sell it today you would earn a total of  437.00  from holding HealthStream or generate 15.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Nextgen Healthcare  vs.  HealthStream

Nextgen Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextgen Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Nextgen Healthcare is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Nextgen Healthcare and HealthStream

The main advantage of trading using opposite Nextgen Healthcare and HealthStream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextgen Healthcare 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 Nextgen Healthcare 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.