Correlation Between EHEALTH and Expedia

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

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

Diversification Opportunities for EHEALTH and Expedia

0.94

Correlation Coefficient

EHEALTH  Expedia

Almost no diversification

The 3 months correlation between EHEALTH and Expedia is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group 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 Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of EHEALTH i.e., EHEALTH and Expedia go up and down completely randomly.

Pair Corralation between EHEALTH and Expedia

Assuming the 90 days trading horizon EHEALTH is expected to generate 1.17 times less return on investment than Expedia. In addition to that, EHEALTH is 1.88 times more volatile than Expedia Group. It trades about 0.03 of its total potential returns per unit of risk. Expedia Group is currently generating about 0.08 per unit of volatility. If you would invest  8,011  in Expedia Group on September 14, 2024 and sell it today you would earn a total of  10,029  from holding Expedia Group or generate 125.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

EHEALTH  vs.  Expedia Group

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. In spite of rather uncertain basic indicators, EHEALTH exhibited solid returns over the last few months and may actually be approaching a breakup point.

Expedia Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Expedia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHEALTH and Expedia

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

The idea behind EHEALTH and Expedia Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.