Correlation Between EHealth and CorVel Corp

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

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

Diversification Opportunities for EHealth and CorVel Corp

0.36

Correlation Coefficient

EHealth  CorVel Corp

Weak diversification

The 3 months correlation between EHealth and CorVel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding eHealth and CorVel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CorVel Corp 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 CorVel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CorVel Corp has no effect on the direction of EHealth i.e., EHealth and CorVel Corp go up and down completely randomly.

Pair Corralation between EHealth and CorVel Corp

Given the investment horizon of 90 days eHealth is expected to generate 4.42 times more return on investment than CorVel Corp. However, EHealth is 4.42 times more volatile than CorVel Corp. It trades about 0.26 of its potential returns per unit of risk. CorVel Corp is currently generating about -0.15 per unit of risk. If you would invest  565.00  in eHealth on September 29, 2024 and sell it today you would earn a total of  300.00  from holding eHealth or generate 53.1% return on investment over 90 days.

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

eHealth  vs.  CorVel Corp

eHealth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eHealth are ranked lower than 17 (%) 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.

CorVel Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CorVel Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CorVel Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with EHealth and CorVel Corp

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

The idea behind eHealth and CorVel Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.