Correlation Between HealthStream and Definitive Healthcare

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

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

Diversification Opportunities for HealthStream and Definitive Healthcare

-0.77

Correlation Coefficient

HealthStream  Definitive Healthcare

Pay attention - limited upside

The 3 months correlation between HealthStream and Definitive is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare and HealthStream 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 HealthStream are associated (or correlated) with Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of HealthStream i.e., HealthStream and Definitive Healthcare go up and down completely randomly.

Pair Corralation between HealthStream and Definitive Healthcare

Given the investment horizon of 90 days HealthStream is expected to under-perform the Definitive Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, HealthStream is 1.7 times less risky than Definitive Healthcare. The stock trades about -0.09 of its potential returns per unit of risk. The Definitive Healthcare Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  251.00  in Definitive Healthcare Corp on April 21, 2025 and sell it today you would earn a total of  133.00  from holding Definitive Healthcare Corp or generate 52.99% return on investment over 90 days.

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

HealthStream  vs.  Definitive Healthcare Corp

HealthStream

Risk-Adjusted Performance

Very Weak

Over the last 90 days HealthStream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Definitive Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Definitive Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HealthStream and Definitive Healthcare

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

The idea behind HealthStream and Definitive Healthcare Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.