Correlation Between Porvair Plc and EHealth
Can any of the company-specific risk be diversified away by investing in both Porvair Plc 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 Porvair Plc and EHealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Porvair plc and eHealth, you can compare the effects of market volatilities on Porvair Plc 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 Porvair Plc with a short position of EHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porvair Plc and EHealth.
Diversification Opportunities for Porvair Plc and EHealth
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Porvair and EHealth is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Porvair plc and eHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eHealth and Porvair Plc 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 Porvair plc 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 Porvair Plc i.e., Porvair Plc and EHealth go up and down completely randomly.
Pair Corralation between Porvair Plc and EHealth
Assuming the 90 days horizon Porvair Plc is expected to generate 3.39 times less return on investment than EHealth. But when comparing it to its historical volatility, Porvair plc is 5.06 times less risky than EHealth. It trades about 0.05 of its potential returns per unit of risk. eHealth is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 415.00 in eHealth on January 30, 2024 and sell it today you would earn a total of 38.00 from holding eHealth or generate 9.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Porvair plc vs. eHealth
Performance |
Timeline |
Porvair plc |
eHealth |
Porvair Plc and EHealth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Porvair Plc and EHealth
The main advantage of trading using opposite Porvair Plc and EHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porvair Plc 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.Porvair Plc vs. Microsoft | Porvair Plc vs. Apple Inc | Porvair Plc vs. NVIDIA | Porvair Plc vs. Alphabet Inc Class C |
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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