Correlation Between EHEALTH and CANADA RARE

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

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

Diversification Opportunities for EHEALTH and CANADA RARE

0.26

Correlation Coefficient

EHEALTH  CANADA RARE

Modest diversification

The 3 months correlation between EHEALTH and CANADA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and CANADA RARE EARTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANADA RARE EARTH 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 CANADA RARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANADA RARE EARTH has no effect on the direction of EHEALTH i.e., EHEALTH and CANADA RARE go up and down completely randomly.

Pair Corralation between EHEALTH and CANADA RARE

Assuming the 90 days trading horizon EHEALTH is expected to generate 28.34 times less return on investment than CANADA RARE. But when comparing it to its historical volatility, EHEALTH is 20.83 times less risky than CANADA RARE. It trades about 0.19 of its potential returns per unit of risk. CANADA RARE EARTH is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  0.50  in CANADA RARE EARTH on September 13, 2024 and sell it today you would earn a total of  0.35  from holding CANADA RARE EARTH or generate 70.0% 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.  CANADA RARE EARTH

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.

CANADA RARE EARTH

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CANADA RARE EARTH are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CANADA RARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHEALTH and CANADA RARE

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

The idea behind EHEALTH and CANADA RARE EARTH 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.