Correlation Between HealthEquity and CloudMD Software

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

By analyzing existing cross correlation between HealthEquity and CloudMD Software Services, you can compare the effects of market volatilities on HealthEquity and CloudMD Software 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 CloudMD Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of HealthEquity and CloudMD Software.

Diversification Opportunities for HealthEquity and CloudMD Software

0.5

Correlation Coefficient

HealthEquity  CloudMD Software

Very weak diversification

The 3 months correlation between HealthEquity and CloudMD is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding HealthEquity and CloudMD Software Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CloudMD Software Services 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 CloudMD Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CloudMD Software Services has no effect on the direction of HealthEquity i.e., HealthEquity and CloudMD Software go up and down completely randomly.

Pair Corralation between HealthEquity and CloudMD Software

Considering the 90-day investment horizon HealthEquity is expected to generate 0.05 times more return on investment than CloudMD Software. However, HealthEquity is 20.29 times less risky than CloudMD Software. It trades about 0.02 of its potential returns per unit of risk. CloudMD Software Services is currently generating about -0.02 per unit of risk. If you would invest  7,891  in HealthEquity on March 1, 2024 and sell it today you would earn a total of  28.00  from holding HealthEquity or generate 0.35% return on investment over 90 days.

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

HealthEquity  vs.  CloudMD Software Services

HealthEquity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HealthEquity has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

CloudMD Software Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CloudMD Software Services 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 basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HealthEquity and CloudMD Software

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

The idea behind HealthEquity and CloudMD Software Services 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.