Correlation Between EHealth and Brown Brown

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

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

Diversification Opportunities for EHealth and Brown Brown

-0.76

Correlation Coefficient

EHealth  Brown Brown

Pay attention - limited upside

The 3 months correlation between EHealth and Brown is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown and EHealth 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 eHealth are associated (or correlated) with Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of EHealth i.e., EHealth and Brown Brown go up and down completely randomly.

Pair Corralation between EHealth and Brown Brown

Given the investment horizon of 90 days eHealth is expected to under-perform the Brown Brown. In addition to that, EHealth is 4.01 times more volatile than Brown Brown. It trades about -0.1 of its total potential returns per unit of risk. Brown Brown is currently generating about 0.3 per unit of volatility. If you would invest  10,185  in Brown Brown on December 28, 2024 and sell it today you would earn a total of  2,026  from holding Brown Brown or generate 19.89% return on investment over 90 days.

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

eHealth  vs.  Brown Brown

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Brown Brown

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brown Brown displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHealth and Brown Brown

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

The idea behind eHealth and Brown Brown 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.