Correlation Between EHealth and Crawford

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

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

Diversification Opportunities for EHealth and Crawford

-0.07

Correlation Coefficient

EHealth  Crawford

Good diversification

The 3 months correlation between EHealth and Crawford is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Crawford Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crawford 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 Crawford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crawford has no effect on the direction of EHealth i.e., EHealth and Crawford go up and down completely randomly.

Pair Corralation between EHealth and Crawford

Given the investment horizon of 90 days eHealth is expected to generate 4.35 times more return on investment than Crawford. However, EHealth is 4.35 times more volatile than Crawford Company. It trades about 0.32 of its potential returns per unit of risk. Crawford Company is currently generating about 0.02 per unit of risk. If you would invest  559.00  in eHealth on October 8, 2024 and sell it today you would earn a total of  396.00  from holding eHealth or generate 70.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

eHealth  vs.  Crawford Company

eHealth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eHealth are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, EHealth demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Crawford

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crawford Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Crawford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EHealth and Crawford

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

The idea behind eHealth and Crawford Company 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.