Correlation Between HealthStream and Masimo

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

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

Diversification Opportunities for HealthStream and Masimo

-0.49

Correlation Coefficient

HealthStream  Masimo

Very good diversification

The 3 months correlation between HealthStream and Masimo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo and HealthStream 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 HealthStream are associated (or correlated) with Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of HealthStream i.e., HealthStream and Masimo go up and down completely randomly.

Pair Corralation between HealthStream and Masimo

Given the investment horizon of 90 days HealthStream is expected to generate 2.18 times more return on investment than Masimo. However, HealthStream is 2.18 times more volatile than Masimo. It trades about 0.12 of its potential returns per unit of risk. Masimo is currently generating about -0.08 per unit of risk. If you would invest  2,542  in HealthStream on February 4, 2024 and sell it today you would earn a total of  161.00  from holding HealthStream or generate 6.33% return on investment over 90 days.

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

HealthStream  vs.  Masimo

HealthStream

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HealthStream is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Masimo

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masimo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Masimo is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with HealthStream and Masimo

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

The idea behind HealthStream and Masimo 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.