Correlation Between Definitive Healthcare and Smith Nephew

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

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

Diversification Opportunities for Definitive Healthcare and Smith Nephew

0.55

Correlation Coefficient

Definitive Healthcare  Smith Nephew

Very weak diversification

The 3 months correlation between Definitive and Smith is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS and Definitive Healthcare 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 Definitive Healthcare Corp are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and Smith Nephew go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Smith Nephew

Allowing for the 90-day total investment horizon Definitive Healthcare is expected to generate 2.58 times less return on investment than Smith Nephew. In addition to that, Definitive Healthcare is 1.25 times more volatile than Smith Nephew SNATS. It trades about 0.05 of its total potential returns per unit of risk. Smith Nephew SNATS is currently generating about 0.18 per unit of volatility. If you would invest  2,834  in Smith Nephew SNATS on May 9, 2025 and sell it today you would earn a total of  774.00  from holding Smith Nephew SNATS or generate 27.31% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  Smith Nephew SNATS

Definitive Healthcare

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Definitive Healthcare may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Smith Nephew SNATS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smith Nephew SNATS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Smith Nephew displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Definitive Healthcare and Smith Nephew

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

The idea behind Definitive Healthcare Corp and Smith Nephew SNATS 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.