Correlation Between Neuropace and HealthStream

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

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

Diversification Opportunities for Neuropace and HealthStream

0.15

Correlation Coefficient

Neuropace  HealthStream

Average diversification

The 3 months correlation between Neuropace and HealthStream is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Neuropace and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream and Neuropace 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 Neuropace 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 Neuropace i.e., Neuropace and HealthStream go up and down completely randomly.

Pair Corralation between Neuropace and HealthStream

Given the investment horizon of 90 days Neuropace is expected to generate 1.94 times more return on investment than HealthStream. However, Neuropace is 1.94 times more volatile than HealthStream. It trades about -0.06 of its potential returns per unit of risk. HealthStream is currently generating about -0.13 per unit of risk. If you would invest  1,198  in Neuropace on May 2, 2025 and sell it today you would lose (322.00) from holding Neuropace or give up 26.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Neuropace  vs.  HealthStream

Neuropace

Risk-Adjusted Performance

Very Weak

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 August 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Neuropace and HealthStream

The main advantage of trading using opposite Neuropace and HealthStream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neuropace 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 Neuropace 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.