Correlation Between Privia Health and Nextgen Healthcare

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

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

Diversification Opportunities for Privia Health and Nextgen Healthcare

0.3

Correlation Coefficient

Privia Health  Nextgen Healthcare

Weak diversification

The 3 months correlation between Privia and Nextgen is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Privia Health Group and Nextgen Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen Healthcare and Privia 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 Privia Health Group are associated (or correlated) with Nextgen Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen Healthcare has no effect on the direction of Privia Health i.e., Privia Health and Nextgen Healthcare go up and down completely randomly.

Pair Corralation between Privia Health and Nextgen Healthcare

Given the investment horizon of 90 days Privia Health Group is expected to generate 1.77 times more return on investment than Nextgen Healthcare. However, Privia Health is 1.77 times more volatile than Nextgen Healthcare. It trades about 0.0 of its potential returns per unit of risk. Nextgen Healthcare is currently generating about -0.05 per unit of risk. If you would invest  2,550  in Privia Health Group on September 3, 2024 and sell it today you would lose (319.00) from holding Privia Health Group or give up 12.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.91%
Values	Daily Returns

Privia Health Group  vs.  Nextgen Healthcare

Privia Health Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Privia Health Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Privia Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Nextgen Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextgen Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Nextgen Healthcare is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Privia Health and Nextgen Healthcare

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

The idea behind Privia Health Group and Nextgen Healthcare 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.