Correlation Between Evolent Health and Health Catalyst

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

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

Diversification Opportunities for Evolent Health and Health Catalyst

-0.18

Correlation Coefficient

Evolent Health  Health Catalyst

Good diversification

The 3 months correlation between Evolent and Health is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and Health Catalyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Catalyst 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 Health Catalyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Catalyst has no effect on the direction of Evolent Health i.e., Evolent Health and Health Catalyst go up and down completely randomly.

Pair Corralation between Evolent Health and Health Catalyst

Considering the 90-day investment horizon Evolent Health is expected to generate 0.55 times more return on investment than Health Catalyst. However, Evolent Health is 1.8 times less risky than Health Catalyst. It trades about -0.21 of its potential returns per unit of risk. Health Catalyst is currently generating about -0.43 per unit of risk. If you would invest  3,217  in Evolent Health on January 18, 2024 and sell it today you would lose (253.00) from holding Evolent Health or give up 7.86% of portfolio value over 90 days.

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

Evolent Health  vs.  Health Catalyst

Evolent Health

Risk-Adjusted Performance

0 of 100

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Health Catalyst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Catalyst 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 basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Evolent Health and Health Catalyst

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

The idea behind Evolent Health and Health Catalyst 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.