Correlation Between Willis Towers and EHealth

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

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

Diversification Opportunities for Willis Towers and EHealth

0.45

Correlation Coefficient

Willis Towers  EHealth

Very weak diversification

The 3 months correlation between Willis and EHealth is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Willis Towers Watson and eHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eHealth and Willis Towers 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 Willis Towers Watson are associated (or correlated) with EHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eHealth has no effect on the direction of Willis Towers i.e., Willis Towers and EHealth go up and down completely randomly.

Pair Corralation between Willis Towers and EHealth

Considering the 90-day investment horizon Willis Towers Watson is expected to under-perform the EHealth. But the stock apears to be less risky and, when comparing its historical volatility, Willis Towers Watson is 7.87 times less risky than EHealth. The stock trades about -0.24 of its potential returns per unit of risk. The eHealth is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  547.00  in eHealth on October 6, 2024 and sell it today you would earn a total of  408.00  from holding eHealth or generate 74.59% return on investment over 90 days.

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

Willis Towers Watson  vs.  eHealth

Willis Towers Watson

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Willis Towers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

eHealth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eHealth are ranked lower than 17 (%) 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.

Pair Trading with Willis Towers and EHealth

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

The idea behind Willis Towers Watson and eHealth 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.