Correlation Between EHealth and Huize Holding

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

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

Diversification Opportunities for EHealth and Huize Holding

0.21

Correlation Coefficient

EHealth  Huize Holding

Modest diversification

The 3 months correlation between EHealth and Huize is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Huize Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huize Holding 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 Huize Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huize Holding has no effect on the direction of EHealth i.e., EHealth and Huize Holding go up and down completely randomly.

Pair Corralation between EHealth and Huize Holding

Given the investment horizon of 90 days EHealth is expected to generate 22.15 times less return on investment than Huize Holding. But when comparing it to its historical volatility, eHealth is 36.69 times less risky than Huize Holding. It trades about 0.2 of its potential returns per unit of risk. Huize Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Huize Holding on September 12, 2024 and sell it today you would earn a total of  336.00  from holding Huize Holding or generate 460.27% return on investment over 90 days.

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

eHealth  vs.  Huize Holding

eHealth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eHealth are ranked lower than 15 (%) 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.

Huize Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huize Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Huize Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHealth and Huize Holding

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

The idea behind eHealth and Huize Holding 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.