Correlation Between HealthStream and Sharecare

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

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

Diversification Opportunities for HealthStream and Sharecare

0.8

Correlation Coefficient

HealthStream  Sharecare

Very poor diversification

The 3 months correlation between HealthStream and Sharecare is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Sharecare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharecare 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 Sharecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharecare has no effect on the direction of HealthStream i.e., HealthStream and Sharecare go up and down completely randomly.

Pair Corralation between HealthStream and Sharecare

Given the investment horizon of 90 days HealthStream is expected to generate 3.17 times more return on investment than Sharecare. However, HealthStream is 3.17 times more volatile than Sharecare. It trades about 0.14 of its potential returns per unit of risk. Sharecare is currently generating about 0.15 per unit of risk. If you would invest  2,866  in HealthStream on September 2, 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	Strong
Accuracy	56.25%
Values	Daily Returns

HealthStream  vs.  Sharecare

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 unsteady basic indicators, HealthStream displayed solid returns over the last few months and may actually be approaching a breakup point.

Sharecare

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sharecare has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Sharecare is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HealthStream and Sharecare

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

The idea behind HealthStream and Sharecare 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..