Correlation Between Evolent Health and Goodrx HoldingsInc

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

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

Diversification Opportunities for Evolent Health and Goodrx HoldingsInc

0.68

Correlation Coefficient

Evolent Health  Goodrx HoldingsInc

Poor diversification

The 3 months correlation between Evolent and Goodrx is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and Goodrx HoldingsInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodrx HoldingsInc and Evolent Health 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 Evolent Health are associated (or correlated) with Goodrx HoldingsInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodrx HoldingsInc has no effect on the direction of Evolent Health i.e., Evolent Health and Goodrx HoldingsInc go up and down completely randomly.

Pair Corralation between Evolent Health and Goodrx HoldingsInc

Considering the 90-day investment horizon Evolent Health is expected to under-perform the Goodrx HoldingsInc. But the stock apears to be less risky and, when comparing its historical volatility, Evolent Health is 1.23 times less risky than Goodrx HoldingsInc. The stock trades about -0.24 of its potential returns per unit of risk. The Goodrx HoldingsInc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  706.00  in Goodrx HoldingsInc on January 26, 2024 and sell it today you would lose (10.00) from holding Goodrx HoldingsInc or give up 1.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Evolent Health  vs.  Goodrx HoldingsInc

Evolent Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolent Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Evolent Health is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Goodrx HoldingsInc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goodrx HoldingsInc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Goodrx HoldingsInc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Evolent Health and Goodrx HoldingsInc

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

The idea behind Evolent Health and Goodrx HoldingsInc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.