Correlation Between Option Care and Definitive Healthcare

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

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

Diversification Opportunities for Option Care and Definitive Healthcare

0.04

Correlation Coefficient

Option Care  Definitive Healthcare

Significant diversification

The 3 months correlation between Option and Definitive is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare and Option Care 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 Option Care Health are associated (or correlated) with Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of Option Care i.e., Option Care and Definitive Healthcare go up and down completely randomly.

Pair Corralation between Option Care and Definitive Healthcare

Given the investment horizon of 90 days Option Care Health is expected to under-perform the Definitive Healthcare. In addition to that, Option Care is 1.6 times more volatile than Definitive Healthcare Corp. It trades about -0.09 of its total potential returns per unit of risk. Definitive Healthcare Corp is currently generating about -0.03 per unit of volatility. If you would invest  434.00  in Definitive Healthcare Corp on October 2, 2024 and sell it today you would lose (23.00) from holding Definitive Healthcare Corp or give up 5.3% of portfolio value over 90 days.

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

Option Care Health  vs.  Definitive Healthcare Corp

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Option Care and Definitive Healthcare

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

The idea behind Option Care Health and Definitive Healthcare Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.