Correlation Between Zurn Elkay and Nextgen Healthcare

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

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

Diversification Opportunities for Zurn Elkay and Nextgen Healthcare

-0.55

Correlation Coefficient

Zurn Elkay  Nextgen Healthcare

Excellent diversification

The 3 months correlation between Zurn and Nextgen is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zurn Elkay Water and Nextgen Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen Healthcare and Zurn Elkay 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 Zurn Elkay Water are associated (or correlated) with Nextgen Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen Healthcare has no effect on the direction of Zurn Elkay i.e., Zurn Elkay and Nextgen Healthcare go up and down completely randomly.

Pair Corralation between Zurn Elkay and Nextgen Healthcare

Considering the 90-day investment horizon Zurn Elkay Water is expected to generate 1.35 times more return on investment than Nextgen Healthcare. However, Zurn Elkay is 1.35 times more volatile than Nextgen Healthcare. It trades about 0.07 of its potential returns per unit of risk. Nextgen Healthcare is currently generating about 0.02 per unit of risk. If you would invest  2,498  in Zurn Elkay Water on October 3, 2024 and sell it today you would earn a total of  1,232  from holding Zurn Elkay Water or generate 49.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	7.65%
Values	Daily Returns

Zurn Elkay Water  vs.  Nextgen Healthcare

Zurn Elkay Water

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zurn Elkay Water are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zurn Elkay is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Zurn Elkay and Nextgen Healthcare

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

The idea behind Zurn Elkay Water and Nextgen Healthcare 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.