Correlation Between Teladoc and HealthStream

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

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

Diversification Opportunities for Teladoc and HealthStream

0.69

Correlation Coefficient

Teladoc  HealthStream

Poor diversification

The 3 months correlation between Teladoc and HealthStream is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Teladoc and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and Teladoc 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 Teladoc are associated (or correlated) with HealthStream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthStream has no effect on the direction of Teladoc i.e., Teladoc and HealthStream go up and down completely randomly.

Pair Corralation between Teladoc and HealthStream

Given the investment horizon of 90 days Teladoc is expected to generate 2.6 times more return on investment than HealthStream. However, Teladoc is 2.6 times more volatile than HealthStream. It trades about 0.19 of its potential returns per unit of risk. HealthStream is currently generating about 0.14 per unit of risk. If you would invest  738.00  in Teladoc on September 3, 2024 and sell it today you would earn a total of  460.00  from holding Teladoc or generate 62.33% return on investment over 90 days.

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

Teladoc  vs.  HealthStream

Teladoc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Teladoc exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Teladoc and HealthStream

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

The idea behind Teladoc and HealthStream 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.