Correlation Between HealthStream and Goodrx HoldingsInc

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

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

Diversification Opportunities for HealthStream and Goodrx HoldingsInc

0.54

Correlation Coefficient

HealthStream  Goodrx HoldingsInc

Very weak diversification

The 3 months correlation between HealthStream and Goodrx is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Goodrx HoldingsInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodrx HoldingsInc 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 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 HealthStream i.e., HealthStream and Goodrx HoldingsInc go up and down completely randomly.

Pair Corralation between HealthStream and Goodrx HoldingsInc

Given the investment horizon of 90 days HealthStream is expected to generate 0.5 times more return on investment than Goodrx HoldingsInc. However, HealthStream is 1.99 times less risky than Goodrx HoldingsInc. It trades about 0.02 of its potential returns per unit of risk. Goodrx HoldingsInc is currently generating about 0.0 per unit of risk. If you would invest  2,691  in HealthStream on March 4, 2024 and sell it today you would earn a total of  38.00  from holding HealthStream or generate 1.41% return on investment over 90 days.

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

HealthStream  vs.  Goodrx HoldingsInc

HealthStream

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 1 (%) 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.

Goodrx HoldingsInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodrx HoldingsInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Goodrx HoldingsInc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HealthStream and Goodrx HoldingsInc

The main advantage of trading using opposite HealthStream and Goodrx HoldingsInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HealthStream 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 HealthStream 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.