Correlation Between Everest and EHealth

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

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

Diversification Opportunities for Everest and EHealth

-0.36

Correlation Coefficient

Everest  EHealth

Very good diversification

The 3 months correlation between Everest and EHealth is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Everest Group and eHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eHealth and Everest 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 Everest Group are associated (or correlated) with EHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eHealth has no effect on the direction of Everest i.e., Everest and EHealth go up and down completely randomly.

Pair Corralation between Everest and EHealth

Allowing for the 90-day total investment horizon Everest Group is expected to generate 0.33 times more return on investment than EHealth. However, Everest Group is 3.05 times less risky than EHealth. It trades about 0.05 of its potential returns per unit of risk. eHealth is currently generating about -0.03 per unit of risk. If you would invest  34,741  in Everest Group on December 19, 2024 and sell it today you would earn a total of  1,221  from holding Everest Group or generate 3.51% return on investment over 90 days.

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

Everest Group  vs.  eHealth

Everest Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Everest Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Everest is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

eHealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days eHealth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Everest and EHealth

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

The idea behind Everest Group and eHealth 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.