Correlation Between Arthur J and EHealth

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Can any of the company-specific risk be diversified away by investing in both Arthur J 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 Arthur J and EHealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arthur J Gallagher and EHealth, you can compare the effects of market volatilities on Arthur J 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 Arthur J with a short position of EHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arthur J and EHealth.

Diversification Opportunities for Arthur J and EHealth

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Arthur and EHealth is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and EHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHealth and Arthur J 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 Arthur J Gallagher 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 Arthur J i.e., Arthur J and EHealth go up and down completely randomly.

Pair Corralation between Arthur J and EHealth

Considering the 90-day investment horizon Arthur J Gallagher is expected to generate 0.23 times more return on investment than EHealth. However, Arthur J Gallagher is 4.4 times less risky than EHealth. It trades about 0.1 of its potential returns per unit of risk. EHealth is currently generating about -0.01 per unit of risk. If you would invest  19,137  in Arthur J Gallagher on December 29, 2023 and sell it today you would earn a total of  5,896  from holding Arthur J Gallagher or generate 30.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

Arthur J Gallagher  vs.  EHealth

 Performance 
       Timeline  
Arthur J Gallagher 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Arthur J may actually be approaching a critical reversion point that can send shares even higher in April 2024.
EHealth 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days EHealth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Arthur J and EHealth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arthur J and EHealth

The main advantage of trading using opposite Arthur J and EHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arthur J 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 Arthur J Gallagher 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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