Correlation Between EHEALTH and Cofina SGPS

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

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

Diversification Opportunities for EHEALTH and Cofina SGPS

0.63

Correlation Coefficient

EHEALTH  Cofina SGPS

Poor diversification

The 3 months correlation between EHEALTH and Cofina is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and Cofina SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofina SGPS SA 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 Cofina SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofina SGPS SA has no effect on the direction of EHEALTH i.e., EHEALTH and Cofina SGPS go up and down completely randomly.

Pair Corralation between EHEALTH and Cofina SGPS

Assuming the 90 days trading horizon EHEALTH is expected to generate 2.76 times more return on investment than Cofina SGPS. However, EHEALTH is 2.76 times more volatile than Cofina SGPS SA. It trades about 0.24 of its potential returns per unit of risk. Cofina SGPS SA is currently generating about 0.13 per unit of risk. If you would invest  358.00  in EHEALTH on September 29, 2024 and sell it today you would earn a total of  466.00  from holding EHEALTH or generate 130.17% return on investment over 90 days.

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

EHEALTH  vs.  Cofina SGPS SA

EHEALTH

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EHEALTH are ranked lower than 18 (%) 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.

Cofina SGPS SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cofina SGPS SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cofina SGPS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EHEALTH and Cofina SGPS

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

The idea behind EHEALTH and Cofina SGPS SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.