Correlation Between Live Oak and HealthStream

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

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

Diversification Opportunities for Live Oak and HealthStream

-0.51

Correlation Coefficient

Live Oak  HealthStream

Excellent diversification

The 3 months correlation between Live and HealthStream is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Bancshares and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and Live Oak 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 Live Oak Bancshares are associated (or correlated) with HealthStream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthStream has no effect on the direction of Live Oak i.e., Live Oak and HealthStream go up and down completely randomly.

Pair Corralation between Live Oak and HealthStream

Considering the 90-day investment horizon Live Oak Bancshares is expected to generate 0.77 times more return on investment than HealthStream. However, Live Oak Bancshares is 1.3 times less risky than HealthStream. It trades about 0.15 of its potential returns per unit of risk. HealthStream is currently generating about -0.12 per unit of risk. If you would invest  2,665  in Live Oak Bancshares on May 1, 2025 and sell it today you would earn a total of  552.00  from holding Live Oak Bancshares or generate 20.71% return on investment over 90 days.

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

Live Oak Bancshares  vs.  HealthStream

Live Oak Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Live Oak Bancshares are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Live Oak sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Live Oak and HealthStream

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

The idea behind Live Oak Bancshares and HealthStream 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.