Correlation Between American Well and Teladoc

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

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

Diversification Opportunities for American Well and Teladoc

0.63

Correlation Coefficient

American Well  Teladoc

Poor diversification

The 3 months correlation between American and Teladoc is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Well Corp and Teladoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teladoc and American Well 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 American Well Corp are associated (or correlated) with Teladoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teladoc has no effect on the direction of American Well i.e., American Well and Teladoc go up and down completely randomly.

Pair Corralation between American Well and Teladoc

Given the investment horizon of 90 days American Well Corp is expected to generate 1.76 times more return on investment than Teladoc. However, American Well is 1.76 times more volatile than Teladoc. It trades about 0.07 of its potential returns per unit of risk. Teladoc is currently generating about 0.01 per unit of risk. If you would invest  835.00  in American Well Corp on July 25, 2024 and sell it today you would earn a total of  176.00  from holding American Well Corp or generate 21.08% return on investment over 90 days.

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

American Well Corp  vs.  Teladoc

American Well Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Well Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, American Well disclosed solid returns over the last few months and may actually be approaching a breakup point.

Teladoc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teladoc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Teladoc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Well and Teladoc

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

The idea behind American Well Corp and Teladoc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.