Correlation Between Health Catalyst and Medtronic PLC

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

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

Diversification Opportunities for Health Catalyst and Medtronic PLC

0.74

Correlation Coefficient

Health Catalyst  Medtronic PLC

Poor diversification

The 3 months correlation between Health and Medtronic is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Health Catalyst and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and Health Catalyst 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 Health Catalyst are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Health Catalyst i.e., Health Catalyst and Medtronic PLC go up and down completely randomly.

Pair Corralation between Health Catalyst and Medtronic PLC

Given the investment horizon of 90 days Health Catalyst is expected to generate 3.71 times more return on investment than Medtronic PLC. However, Health Catalyst is 3.71 times more volatile than Medtronic PLC. It trades about 0.0 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.14 per unit of risk. If you would invest  658.00  in Health Catalyst on February 5, 2024 and sell it today you would lose (10.00) from holding Health Catalyst or give up 1.52% of portfolio value over 90 days.

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

Health Catalyst  vs.  Medtronic PLC

Health Catalyst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Catalyst has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Medtronic PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Health Catalyst and Medtronic PLC

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

The idea behind Health Catalyst and Medtronic PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.