Correlation Between Globus Medical and HealthEquity

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

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

Diversification Opportunities for Globus Medical and HealthEquity

0.45

Correlation Coefficient

Globus Medical  HealthEquity

Very weak diversification

The 3 months correlation between Globus and HealthEquity is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Globus Medical and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity and Globus Medical 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 Globus Medical 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 Globus Medical i.e., Globus Medical and HealthEquity go up and down completely randomly.

Pair Corralation between Globus Medical and HealthEquity

Given the investment horizon of 90 days Globus Medical is expected to generate 6.75 times less return on investment than HealthEquity. But when comparing it to its historical volatility, Globus Medical is 1.85 times less risky than HealthEquity. It trades about 0.05 of its potential returns per unit of risk. HealthEquity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,596  in HealthEquity on July 25, 2024 and sell it today you would earn a total of  1,165  from holding HealthEquity or generate 15.34% return on investment over 90 days.

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

Globus Medical  vs.  HealthEquity

Globus Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globus Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Globus Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

HealthEquity

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, HealthEquity may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Globus Medical and HealthEquity

The main advantage of trading using opposite Globus Medical and HealthEquity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globus Medical 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 Globus Medical 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.