Correlation Between CareCloud and HealthStream

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

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

Diversification Opportunities for CareCloud and HealthStream

0.67

Correlation Coefficient

CareCloud  HealthStream

Poor diversification

The 3 months correlation between CareCloud and HealthStream is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CareCloud and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and CareCloud 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 CareCloud are associated (or correlated) with HealthStream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthStream has no effect on the direction of CareCloud i.e., CareCloud and HealthStream go up and down completely randomly.

Pair Corralation between CareCloud and HealthStream

Given the investment horizon of 90 days CareCloud is expected to generate 4.4 times more return on investment than HealthStream. However, CareCloud is 4.4 times more volatile than HealthStream. It trades about 0.07 of its potential returns per unit of risk. HealthStream is currently generating about 0.11 per unit of risk. If you would invest  273.00  in CareCloud on September 17, 2024 and sell it today you would earn a total of  54.00  from holding CareCloud or generate 19.78% return on investment over 90 days.

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

CareCloud  vs.  HealthStream

CareCloud

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CareCloud are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, CareCloud exhibited solid returns over the last few months and may actually be approaching a breakup point.

HealthStream

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, HealthStream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CareCloud and HealthStream

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

The idea behind CareCloud and HealthStream 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.