Correlation Between R1 RCM and Evolent Health

Can any of the company-specific risk be diversified away by investing in both R1 RCM and Evolent Health 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 R1 RCM and Evolent Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between R1 RCM Inc and Evolent Health, you can compare the effects of market volatilities on R1 RCM and Evolent Health 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 R1 RCM with a short position of Evolent Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of R1 RCM and Evolent Health.

Diversification Opportunities for R1 RCM and Evolent Health

-0.89

Correlation Coefficient

R1 RCM  Evolent Health

Pay attention - limited upside

The 3 months correlation between RCM and Evolent is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding R1 RCM Inc and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health and R1 RCM 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 R1 RCM Inc are associated (or correlated) with Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of R1 RCM i.e., R1 RCM and Evolent Health go up and down completely randomly.

Pair Corralation between R1 RCM and Evolent Health

Considering the 90-day investment horizon R1 RCM Inc is expected to generate 0.01 times more return on investment than Evolent Health. However, R1 RCM Inc is 91.67 times less risky than Evolent Health. It trades about 0.26 of its potential returns per unit of risk. Evolent Health is currently generating about -0.18 per unit of risk. If you would invest  1,421  in R1 RCM Inc on September 8, 2024 and sell it today you would earn a total of  10.00  from holding R1 RCM Inc or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	70.45%
Values	Daily Returns

R1 RCM Inc  vs.  Evolent Health

R1 RCM Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days R1 RCM Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, R1 RCM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 inconsistent 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.

Pair Trading with R1 RCM and Evolent Health

The main advantage of trading using opposite R1 RCM and Evolent Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if R1 RCM position performs unexpectedly, Evolent Health 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 Evolent Health will offset losses from the drop in Evolent Health's long position.

The idea behind R1 RCM Inc and Evolent Health 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.