Correlation Between Brown Brown and EHealth
Can any of the company-specific risk be diversified away by investing in both Brown Brown 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 Brown Brown and EHealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brown Brown and eHealth, you can compare the effects of market volatilities on Brown Brown 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 Brown Brown with a short position of EHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brown Brown and EHealth.
Diversification Opportunities for Brown Brown and EHealth
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Brown and EHealth is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Brown Brown and eHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eHealth and Brown Brown 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 Brown Brown 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 Brown Brown i.e., Brown Brown and EHealth go up and down completely randomly.
Pair Corralation between Brown Brown and EHealth
Considering the 90-day investment horizon Brown Brown is expected to generate 0.28 times more return on investment than EHealth. However, Brown Brown is 3.63 times less risky than EHealth. It trades about 0.04 of its potential returns per unit of risk. eHealth is currently generating about 0.01 per unit of risk. If you would invest 6,110 in Brown Brown on January 19, 2024 and sell it today you would earn a total of 2,029 from holding Brown Brown or generate 33.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brown Brown vs. eHealth
Performance |
| Timeline |
| Brown Brown |
| eHealth |
Brown Brown and EHealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brown Brown and EHealth
The main advantage of trading using opposite Brown Brown and EHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brown Brown 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 Brown Brown 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.Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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