Correlation Between Large Cap and Eventide Healthcare

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

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

Diversification Opportunities for Large Cap and Eventide Healthcare

0.85

Correlation Coefficient

Large Cap  Eventide Healthcare

Very poor diversification

The 3 months correlation between Large and Eventide is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Value and Eventide Healthcare Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Healthcare Life and Large Cap 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 Large Cap Value are associated (or correlated) with Eventide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Healthcare Life has no effect on the direction of Large Cap i.e., Large Cap and Eventide Healthcare go up and down completely randomly.

Pair Corralation between Large Cap and Eventide Healthcare

Assuming the 90 days horizon Large Cap is expected to generate 4.29 times less return on investment than Eventide Healthcare. But when comparing it to its historical volatility, Large Cap Value is 1.83 times less risky than Eventide Healthcare. It trades about 0.1 of its potential returns per unit of risk. Eventide Healthcare Life is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,107  in Eventide Healthcare Life on May 20, 2025 and sell it today you would earn a total of  593.00  from holding Eventide Healthcare Life or generate 19.09% return on investment over 90 days.

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

Large Cap Value  vs.  Eventide Healthcare Life

Large Cap Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Value are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eventide Healthcare Life

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eventide Healthcare Life are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Eventide Healthcare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Large Cap and Eventide Healthcare

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

The idea behind Large Cap Value and Eventide Healthcare Life 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.