Correlation Between HealthStream and Premier

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

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

Diversification Opportunities for HealthStream and Premier

0.92

Correlation Coefficient

HealthStream  Premier

Almost no diversification

The 3 months correlation between HealthStream and Premier is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier 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 Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier has no effect on the direction of HealthStream i.e., HealthStream and Premier go up and down completely randomly.

Pair Corralation between HealthStream and Premier

Given the investment horizon of 90 days HealthStream is expected to generate 0.77 times more return on investment than Premier. However, HealthStream is 1.29 times less risky than Premier. It trades about 0.14 of its potential returns per unit of risk. Premier is currently generating about 0.09 per unit of risk. If you would invest  2,866  in HealthStream on September 3, 2024 and sell it today you would earn a total of  444.00  from holding HealthStream or generate 15.49% return on investment over 90 days.

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

HealthStream  vs.  Premier

HealthStream

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthStream are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, HealthStream displayed solid returns over the last few months and may actually be approaching a breakup point.

Premier

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Premier may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HealthStream and Premier

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

The idea behind HealthStream and Premier 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.