Correlation Between EHEALTH and Toyota Tsusho

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

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

Diversification Opportunities for EHEALTH and Toyota Tsusho

-0.35

Correlation Coefficient

EHEALTH  Toyota Tsusho

Very good diversification

The 3 months correlation between EHEALTH and Toyota is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and Toyota Tsusho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Tsusho 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 Toyota Tsusho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Tsusho has no effect on the direction of EHEALTH i.e., EHEALTH and Toyota Tsusho go up and down completely randomly.

Pair Corralation between EHEALTH and Toyota Tsusho

Assuming the 90 days trading horizon EHEALTH is expected to under-perform the Toyota Tsusho. In addition to that, EHEALTH is 1.81 times more volatile than Toyota Tsusho. It trades about -0.08 of its total potential returns per unit of risk. Toyota Tsusho is currently generating about -0.03 per unit of volatility. If you would invest  1,658  in Toyota Tsusho on December 30, 2024 and sell it today you would lose (78.00) from holding Toyota Tsusho or give up 4.7% of portfolio value over 90 days.

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

EHEALTH  vs.  Toyota Tsusho

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Toyota Tsusho

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Tsusho has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Toyota Tsusho 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 Toyota Tsusho

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

The idea behind EHEALTH and Toyota Tsusho 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 Transaction History module to view history of all your transactions and understand their impact on performance.