Correlation Between EHealth and Everest

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

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

Diversification Opportunities for EHealth and Everest

-0.36

Correlation Coefficient

EHealth  Everest

Very good diversification

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

Pair Corralation between EHealth and Everest

Given the investment horizon of 90 days eHealth is expected to under-perform the Everest. In addition to that, EHealth is 3.05 times more volatile than Everest Group. It trades about -0.03 of its total potential returns per unit of risk. Everest Group is currently generating about 0.05 per unit of volatility. 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

eHealth  vs.  Everest Group

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.

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.

Pair Trading with EHealth and Everest

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

The idea behind eHealth and Everest Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.