Correlation Between CareMax and Evolent Health
Can any of the company-specific risk be diversified away by investing in both CareMax 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 CareMax and Evolent Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CareMax and Evolent Health, you can compare the effects of market volatilities on CareMax 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 CareMax with a short position of Evolent Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareMax and Evolent Health.
Diversification Opportunities for CareMax and Evolent Health
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CareMax and Evolent is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CareMax and Evolent Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolent Health and CareMax 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 CareMax 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 CareMax i.e., CareMax and Evolent Health go up and down completely randomly.
Pair Corralation between CareMax and Evolent Health
Given the investment horizon of 90 days CareMax is expected to under-perform the Evolent Health. In addition to that, CareMax is 1.23 times more volatile than Evolent Health. It trades about -0.19 of its total potential returns per unit of risk. Evolent Health is currently generating about -0.21 per unit of volatility. If you would invest 2,361 in Evolent Health on August 27, 2024 and sell it today you would lose (1,140) from holding Evolent Health or give up 48.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CareMax vs. Evolent Health
Performance |
| Timeline |
| CareMax |
| Evolent Health |
CareMax and Evolent Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CareMax and Evolent Health
The main advantage of trading using opposite CareMax and Evolent Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CareMax 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 CareMax 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.| Evolent Health vs. HealthStream | Evolent Health vs. National Research Corp | Evolent Health vs. Forian Inc | Evolent Health vs. HealthEquity |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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