Correlation Between Evolent Health and Certara

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

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

Diversification Opportunities for Evolent Health and Certara

0.4

Correlation Coefficient

Evolent Health  Certara

Very weak diversification

The 3 months correlation between Evolent and Certara is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and Certara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Certara 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 Certara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Certara has no effect on the direction of Evolent Health i.e., Evolent Health and Certara go up and down completely randomly.

Pair Corralation between Evolent Health and Certara

Considering the 90-day investment horizon Evolent Health is expected to under-perform the Certara. In addition to that, Evolent Health is 1.89 times more volatile than Certara. It trades about -0.13 of its total potential returns per unit of risk. Certara is currently generating about -0.01 per unit of volatility. If you would invest  1,103  in Certara on September 9, 2024 and sell it today you would lose (18.00) from holding Certara or give up 1.63% of portfolio value over 90 days.

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

Evolent Health  vs.  Certara

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Certara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Certara has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Certara is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Evolent Health and Certara

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

The idea behind Evolent Health and Certara 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.