Correlation Between EHealth and Selectquote

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

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

Diversification Opportunities for EHealth and Selectquote

0.87

Correlation Coefficient

EHealth  Selectquote

Very poor diversification

The 3 months correlation between EHealth and Selectquote is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Selectquote in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selectquote 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 Selectquote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selectquote has no effect on the direction of EHealth i.e., EHealth and Selectquote go up and down completely randomly.

Pair Corralation between EHealth and Selectquote

Given the investment horizon of 90 days eHealth is expected to generate 1.0 times more return on investment than Selectquote. However, EHealth is 1.0 times more volatile than Selectquote. It trades about 0.16 of its potential returns per unit of risk. Selectquote is currently generating about 0.14 per unit of risk. If you would invest  565.00  in eHealth on November 28, 2024 and sell it today you would earn a total of  379.00  from holding eHealth or generate 67.08% return on investment over 90 days.

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

eHealth  vs.  Selectquote

eHealth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eHealth are ranked lower than 12 (%) 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.

Selectquote

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Selectquote are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Selectquote unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHealth and Selectquote

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

The idea behind eHealth and Selectquote 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.