Correlation Between Health Catalyst and UFP Technologies

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

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

Diversification Opportunities for Health Catalyst and UFP Technologies

-0.68

Correlation Coefficient

Health Catalyst  UFP Technologies

Excellent diversification

The 3 months correlation between Health and UFP is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Health Catalyst and UFP Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFP Technologies and Health Catalyst 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 Health Catalyst are associated (or correlated) with UFP Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFP Technologies has no effect on the direction of Health Catalyst i.e., Health Catalyst and UFP Technologies go up and down completely randomly.

Pair Corralation between Health Catalyst and UFP Technologies

Given the investment horizon of 90 days Health Catalyst is expected to under-perform the UFP Technologies. In addition to that, Health Catalyst is 1.2 times more volatile than UFP Technologies. It trades about -0.06 of its total potential returns per unit of risk. UFP Technologies is currently generating about 0.08 per unit of volatility. If you would invest  17,500  in UFP Technologies on February 6, 2024 and sell it today you would earn a total of  8,700  from holding UFP Technologies or generate 49.71% return on investment over 90 days.

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

Health Catalyst  vs.  UFP Technologies

Health Catalyst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Catalyst has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

UFP Technologies

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Health Catalyst and UFP Technologies

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

The idea behind Health Catalyst and UFP Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.