Correlation Between R1 RCM and HealthEquity

Can any of the company-specific risk be diversified away by investing in both R1 RCM and HealthEquity 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 HealthEquity 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 HealthEquity, you can compare the effects of market volatilities on R1 RCM and HealthEquity 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 HealthEquity. Check out your portfolio center. Please also check ongoing floating volatility patterns of R1 RCM and HealthEquity.

Diversification Opportunities for R1 RCM and HealthEquity

0.92

Correlation Coefficient

R1 RCM  HealthEquity

Almost no diversification

The 3 months correlation between RCM and HealthEquity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding R1 RCM Inc and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity 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 HealthEquity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthEquity has no effect on the direction of R1 RCM i.e., R1 RCM and HealthEquity go up and down completely randomly.

Pair Corralation between R1 RCM and HealthEquity

Considering the 90-day investment horizon R1 RCM is expected to generate 18.3 times less return on investment than HealthEquity. But when comparing it to its historical volatility, R1 RCM Inc is 18.55 times less risky than HealthEquity. It trades about 0.24 of its potential returns per unit of risk. HealthEquity is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  7,515  in HealthEquity on September 11, 2024 and sell it today you would earn a total of  2,585  from holding HealthEquity or generate 34.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	79.37%
Values	Daily Returns

R1 RCM Inc  vs.  HealthEquity

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.

HealthEquity

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, HealthEquity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with R1 RCM and HealthEquity

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

The idea behind R1 RCM Inc and HealthEquity 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.