Correlation Between Outset Medical and Evolent Health

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

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

Diversification Opportunities for Outset Medical and Evolent Health

-0.08

Correlation Coefficient

Outset Medical  Evolent Health

Good diversification

The 3 months correlation between Outset and Evolent is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health and Outset Medical 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 Outset Medical are associated (or correlated) with Evolent Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolent Health has no effect on the direction of Outset Medical i.e., Outset Medical and Evolent Health go up and down completely randomly.

Pair Corralation between Outset Medical and Evolent Health

Allowing for the 90-day total investment horizon Outset Medical is expected to generate 1.31 times more return on investment than Evolent Health. However, Outset Medical is 1.31 times more volatile than Evolent Health. It trades about 0.09 of its potential returns per unit of risk. Evolent Health is currently generating about 0.01 per unit of risk. If you would invest  1,178  in Outset Medical on May 5, 2025 and sell it today you would earn a total of  326.00  from holding Outset Medical or generate 27.67% return on investment over 90 days.

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

Outset Medical  vs.  Evolent Health

Outset Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Evolent Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolent Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Evolent Health is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Outset Medical and Evolent Health

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

The idea behind Outset Medical and Evolent Health 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.