Correlation Between MultiPlan and HealthStream

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

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

Diversification Opportunities for MultiPlan and HealthStream

0.22

Correlation Coefficient

MultiPlan  HealthStream

Modest diversification

The 3 months correlation between MultiPlan and HealthStream is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MultiPlan and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and MultiPlan 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 MultiPlan are associated (or correlated) with HealthStream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthStream has no effect on the direction of MultiPlan i.e., MultiPlan and HealthStream go up and down completely randomly.

Pair Corralation between MultiPlan and HealthStream

Given the investment horizon of 90 days MultiPlan is expected to generate 3.8 times less return on investment than HealthStream. In addition to that, MultiPlan is 3.19 times more volatile than HealthStream. It trades about 0.02 of its total potential returns per unit of risk. HealthStream is currently generating about 0.27 per unit of volatility. If you would invest  2,409  in HealthStream on February 22, 2024 and sell it today you would earn a total of  333.00  from holding HealthStream or generate 13.82% return on investment over 90 days.

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

MultiPlan  vs.  HealthStream

MultiPlan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MultiPlan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MultiPlan and HealthStream

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

The idea behind MultiPlan and HealthStream 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.