Correlation Between MSP Recovery and HealthStream

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

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

Diversification Opportunities for MSP Recovery and HealthStream

0.53

Correlation Coefficient

MSP Recovery  HealthStream

Very weak diversification

The 3 months correlation between MSP and HealthStream is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MSP Recovery and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and MSP Recovery 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 MSP Recovery 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 MSP Recovery i.e., MSP Recovery and HealthStream go up and down completely randomly.

Pair Corralation between MSP Recovery and HealthStream

Assuming the 90 days horizon MSP Recovery is expected to generate 5.66 times more return on investment than HealthStream. However, MSP Recovery is 5.66 times more volatile than HealthStream. It trades about 0.0 of its potential returns per unit of risk. HealthStream is currently generating about -0.07 per unit of risk. If you would invest  2.45  in MSP Recovery on May 9, 2025 and sell it today you would lose (0.40) from holding MSP Recovery or give up 16.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

MSP Recovery  vs.  HealthStream

MSP Recovery

Risk-Adjusted Performance

Weakest

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

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.

Pair Trading with MSP Recovery and HealthStream

The main advantage of trading using opposite MSP Recovery and HealthStream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSP Recovery 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 MSP Recovery 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.