Correlation Between EHealth and Abacus Life

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

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

Diversification Opportunities for EHealth and Abacus Life

-0.75

Correlation Coefficient

EHealth  Abacus Life

Pay attention - limited upside

The 3 months correlation between EHealth and Abacus is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life 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 Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of EHealth i.e., EHealth and Abacus Life go up and down completely randomly.

Pair Corralation between EHealth and Abacus Life

Given the investment horizon of 90 days eHealth is expected to generate 2.0 times more return on investment than Abacus Life. However, EHealth is 2.0 times more volatile than Abacus Life. It trades about 0.2 of its potential returns per unit of risk. Abacus Life is currently generating about -0.14 per unit of risk. If you would invest  406.00  in eHealth on September 27, 2024 and sell it today you would earn a total of  398.00  from holding eHealth or generate 98.03% return on investment over 90 days.

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

eHealth  vs.  Abacus Life

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. Despite fairly unsteady basic indicators, EHealth demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Abacus Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abacus Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with EHealth and Abacus Life

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

The idea behind eHealth and Abacus Life 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 Commodity Directory module to find actively traded commodities issued by global exchanges.