Correlation Between Clover Health and VeriSign

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

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

Diversification Opportunities for Clover Health and VeriSign

0.06

Correlation Coefficient

Clover Health  VeriSign

Significant diversification

The 3 months correlation between Clover and VeriSign is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign and Clover 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 Clover Health Investments are associated (or correlated) with VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Clover Health i.e., Clover Health and VeriSign go up and down completely randomly.

Pair Corralation between Clover Health and VeriSign

Given the investment horizon of 90 days Clover Health Investments is expected to generate 4.5 times more return on investment than VeriSign. However, Clover Health is 4.5 times more volatile than VeriSign. It trades about 0.12 of its potential returns per unit of risk. VeriSign is currently generating about 0.02 per unit of risk. If you would invest  250.00  in Clover Health Investments on September 1, 2024 and sell it today you would earn a total of  98.00  from holding Clover Health Investments or generate 39.2% return on investment over 90 days.

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

Clover Health Investments  vs.  VeriSign

Clover Health Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Clover Health showed solid returns over the last few months and may actually be approaching a breakup point.

VeriSign

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VeriSign is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Clover Health and VeriSign

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

The idea behind Clover Health Investments and VeriSign 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..