Correlation Between Arthur J and EHealth

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

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

Diversification Opportunities for Arthur J and EHealth

0.28

Correlation Coefficient

Arthur J  EHealth

Modest diversification

The 3 months correlation between Arthur and EHealth is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and eHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eHealth and Arthur J 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 Arthur J Gallagher 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 Arthur J i.e., Arthur J and EHealth go up and down completely randomly.

Pair Corralation between Arthur J and EHealth

Considering the 90-day investment horizon Arthur J is expected to generate 6.84 times less return on investment than EHealth. But when comparing it to its historical volatility, Arthur J Gallagher is 2.88 times less risky than EHealth. It trades about 0.09 of its potential returns per unit of risk. eHealth is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  376.00  in eHealth on September 2, 2024 and sell it today you would earn a total of  189.00  from holding eHealth or generate 50.27% return on investment over 90 days.

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

Arthur J Gallagher  vs.  eHealth

Arthur J Gallagher

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, Arthur J may actually be approaching a critical reversion point that can send shares even higher in January 2025.

eHealth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eHealth are ranked lower than 16 (%) 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 Arthur J and EHealth

The main advantage of trading using opposite Arthur J and EHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arthur J 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 Arthur J Gallagher 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.