Correlation Between EHealth and Erie Indemnity

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

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

Diversification Opportunities for EHealth and Erie Indemnity

-0.66

Correlation Coefficient

EHealth  Erie Indemnity

Excellent diversification

The 3 months correlation between EHealth and Erie is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Erie Indemnity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erie Indemnity 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 Erie Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erie Indemnity has no effect on the direction of EHealth i.e., EHealth and Erie Indemnity go up and down completely randomly.

Pair Corralation between EHealth and Erie Indemnity

Given the investment horizon of 90 days eHealth is expected to under-perform the Erie Indemnity. In addition to that, EHealth is 1.9 times more volatile than Erie Indemnity. It trades about -0.1 of its total potential returns per unit of risk. Erie Indemnity is currently generating about 0.01 per unit of volatility. If you would invest  40,999  in Erie Indemnity on December 28, 2024 and sell it today you would earn a total of  67.00  from holding Erie Indemnity or generate 0.16% return on investment over 90 days.

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

eHealth  vs.  Erie Indemnity

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.

Erie Indemnity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Erie Indemnity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Erie Indemnity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EHealth and Erie Indemnity

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

The idea behind eHealth and Erie Indemnity 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.