Correlation Between EHEALTH and Taylor Morrison

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

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

Diversification Opportunities for EHEALTH and Taylor Morrison

0.79

Correlation Coefficient

EHEALTH  Taylor Morrison

Poor diversification

The 3 months correlation between EHEALTH and Taylor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and Taylor Morrison Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taylor Morrison Home 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 Taylor Morrison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taylor Morrison Home has no effect on the direction of EHEALTH i.e., EHEALTH and Taylor Morrison go up and down completely randomly.

Pair Corralation between EHEALTH and Taylor Morrison

Assuming the 90 days trading horizon EHEALTH is expected to under-perform the Taylor Morrison. In addition to that, EHEALTH is 1.97 times more volatile than Taylor Morrison Home. It trades about -0.08 of its total potential returns per unit of risk. Taylor Morrison Home is currently generating about -0.02 per unit of volatility. If you would invest  5,750  in Taylor Morrison Home on December 30, 2024 and sell it today you would lose (200.00) from holding Taylor Morrison Home or give up 3.48% of portfolio value over 90 days.

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

EHEALTH  vs.  Taylor Morrison Home

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.

Taylor Morrison Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taylor Morrison Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Taylor Morrison is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EHEALTH and Taylor Morrison

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

The idea behind EHEALTH and Taylor Morrison Home 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..