Correlation Between EHealth and Globe Life

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

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

Diversification Opportunities for EHealth and Globe Life

0.52

Correlation Coefficient

EHealth  Globe Life

Very weak diversification

The 3 months correlation between EHealth and Globe is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Globe Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Life 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 Globe Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Life has no effect on the direction of EHealth i.e., EHealth and Globe Life go up and down completely randomly.

Pair Corralation between EHealth and Globe Life

Given the investment horizon of 90 days eHealth is expected to under-perform the Globe Life. In addition to that, EHealth is 2.99 times more volatile than Globe Life. It trades about -0.03 of its total potential returns per unit of risk. Globe Life is currently generating about 0.23 per unit of volatility. If you would invest  10,568  in Globe Life on December 19, 2024 and sell it today you would earn a total of  2,129  from holding Globe Life or generate 20.15% return on investment over 90 days.

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

eHealth  vs.  Globe Life

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.

Globe Life

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Life are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Globe Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHealth and Globe Life

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

The idea behind eHealth and Globe Life 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.