Correlation Between Maiden Holdings and EHealth

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

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

Diversification Opportunities for Maiden Holdings and EHealth

-0.64

Correlation Coefficient

Maiden Holdings  EHealth

Excellent diversification

The 3 months correlation between Maiden and EHealth is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Maiden Holdings and eHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eHealth and Maiden Holdings 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 Maiden Holdings 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 Maiden Holdings i.e., Maiden Holdings and EHealth go up and down completely randomly.

Pair Corralation between Maiden Holdings and EHealth

Given the investment horizon of 90 days Maiden Holdings is expected to under-perform the EHealth. But the stock apears to be less risky and, when comparing its historical volatility, Maiden Holdings is 6.38 times less risky than EHealth. The stock trades about -0.56 of its potential returns per unit of risk. The eHealth is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  537.00  in eHealth on September 27, 2024 and sell it today you would earn a total of  267.00  from holding eHealth or generate 49.72% return on investment over 90 days.

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

Maiden Holdings  vs.  eHealth

Maiden Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maiden Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Maiden Holdings and EHealth

The main advantage of trading using opposite Maiden Holdings and EHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maiden Holdings 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 Maiden Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.