Correlation Between HealthStream and Neuropace

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

By analyzing existing cross correlation between HealthStream and Neuropace, you can compare the effects of market volatilities on HealthStream and Neuropace 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 Neuropace. Check out your portfolio center. Please also check ongoing floating volatility patterns of HealthStream and Neuropace.

Diversification Opportunities for HealthStream and Neuropace

0.72

Correlation Coefficient

HealthStream  Neuropace

Poor diversification

The 3 months correlation between HealthStream and Neuropace is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and Neuropace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuropace 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 Neuropace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuropace has no effect on the direction of HealthStream i.e., HealthStream and Neuropace go up and down completely randomly.

Pair Corralation between HealthStream and Neuropace

Given the investment horizon of 90 days HealthStream is expected to generate 0.29 times more return on investment than Neuropace. However, HealthStream is 3.4 times less risky than Neuropace. It trades about -0.03 of its potential returns per unit of risk. Neuropace is currently generating about -0.17 per unit of risk. If you would invest  2,705  in HealthStream on May 14, 2025 and sell it today you would lose (79.50) from holding HealthStream or give up 2.94% of portfolio value over 90 days.

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

HealthStream  vs.  Neuropace

HealthStream

Risk-Adjusted Performance

Weakest

Over the last 90 days HealthStream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HealthStream is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Neuropace

Risk-Adjusted Performance

Weakest

Over the last 90 days Neuropace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with HealthStream and Neuropace

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

The idea behind HealthStream and Neuropace 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.