Correlation Between HealthEquity and Definitive Healthcare

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

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

Diversification Opportunities for HealthEquity and Definitive Healthcare

0.42

Correlation Coefficient

HealthEquity  Definitive Healthcare

Very weak diversification

The 3 months correlation between HealthEquity and Definitive is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding HealthEquity and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare and HealthEquity 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 HealthEquity 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 HealthEquity i.e., HealthEquity and Definitive Healthcare go up and down completely randomly.

Pair Corralation between HealthEquity and Definitive Healthcare

Considering the 90-day investment horizon HealthEquity is expected to generate 0.35 times more return on investment than Definitive Healthcare. However, HealthEquity is 2.83 times less risky than Definitive Healthcare. It trades about 0.04 of its potential returns per unit of risk. Definitive Healthcare Corp is currently generating about -0.13 per unit of risk. If you would invest  8,109  in HealthEquity on March 8, 2024 and sell it today you would earn a total of  260.00  from holding HealthEquity or generate 3.21% return on investment over 90 days.

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

HealthEquity  vs.  Definitive Healthcare Corp

HealthEquity

Risk-Adjusted Performance

3 of 100

Insignificant

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

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 unsteady performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HealthEquity and Definitive Healthcare

The main advantage of trading using opposite HealthEquity and Definitive Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HealthEquity 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 HealthEquity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.