Correlation Between Evolent Health and Veeva Systems

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

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

Diversification Opportunities for Evolent Health and Veeva Systems

-0.84

Correlation Coefficient

Evolent Health  Veeva Systems

Pay attention - limited upside

The 3 months correlation between Evolent and Veeva is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and Veeva Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems has no effect on the direction of Evolent Health i.e., Evolent Health and Veeva Systems go up and down completely randomly.

Pair Corralation between Evolent Health and Veeva Systems

Assuming the 90 days horizon Evolent Health is expected to under-perform the Veeva Systems. In addition to that, Evolent Health is 2.58 times more volatile than Veeva Systems. It trades about -0.21 of its total potential returns per unit of risk. Veeva Systems is currently generating about 0.08 per unit of volatility. If you would invest  19,085  in Veeva Systems on September 22, 2024 and sell it today you would earn a total of  2,165  from holding Veeva Systems or generate 11.34% return on investment over 90 days.

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

Evolent Health  vs.  Veeva Systems

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Veeva Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Veeva Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Evolent Health and Veeva Systems

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

The idea behind Evolent Health and Veeva Systems 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.