Correlation Between Goodrx HoldingsInc and Evolent Health

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

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

Diversification Opportunities for Goodrx HoldingsInc and Evolent Health

0.7

Correlation Coefficient

Goodrx HoldingsInc  Evolent Health

Poor diversification

The 3 months correlation between Goodrx and Evolent is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Goodrx HoldingsInc and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health and Goodrx HoldingsInc 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 Goodrx HoldingsInc are associated (or correlated) with Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of Goodrx HoldingsInc i.e., Goodrx HoldingsInc and Evolent Health go up and down completely randomly.

Pair Corralation between Goodrx HoldingsInc and Evolent Health

Given the investment horizon of 90 days Goodrx HoldingsInc is expected to generate 1.56 times more return on investment than Evolent Health. However, Goodrx HoldingsInc is 1.56 times more volatile than Evolent Health. It trades about 0.03 of its potential returns per unit of risk. Evolent Health is currently generating about -0.02 per unit of risk. If you would invest  657.00  in Goodrx HoldingsInc on January 20, 2024 and sell it today you would earn a total of  16.00  from holding Goodrx HoldingsInc or generate 2.44% return on investment over 90 days.

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

Goodrx HoldingsInc  vs.  Evolent Health

Goodrx HoldingsInc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goodrx HoldingsInc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Goodrx HoldingsInc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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

Pair Trading with Goodrx HoldingsInc and Evolent Health

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

The idea behind Goodrx HoldingsInc and Evolent Health 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..