Correlation Between Weibo Corp and GoHealth

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

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

Diversification Opportunities for Weibo Corp and GoHealth

-0.41

Correlation Coefficient

Weibo Corp  GoHealth

Very good diversification

The 3 months correlation between Weibo and GoHealth is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and GoHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoHealth and Weibo Corp 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 Weibo Corp are associated (or correlated) with GoHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoHealth has no effect on the direction of Weibo Corp i.e., Weibo Corp and GoHealth go up and down completely randomly.

Pair Corralation between Weibo Corp and GoHealth

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 9.29 times less return on investment than GoHealth. But when comparing it to its historical volatility, Weibo Corp is 1.79 times less risky than GoHealth. It trades about 0.01 of its potential returns per unit of risk. GoHealth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,336  in GoHealth on October 6, 2024 and sell it today you would earn a total of  97.00  from holding GoHealth or generate 7.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Weibo Corp  vs.  GoHealth

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GoHealth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GoHealth are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, GoHealth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weibo Corp and GoHealth

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

The idea behind Weibo Corp and GoHealth 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.