Correlation Between MEDIANA CoLtd and BHI

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

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

Diversification Opportunities for MEDIANA CoLtd and BHI

0.06

Correlation Coefficient

MEDIANA CoLtd  BHI

Significant diversification

The 3 months correlation between MEDIANA and BHI is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MEDIANA CoLtd and BHI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHI Co and MEDIANA CoLtd 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 MEDIANA CoLtd are associated (or correlated) with BHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHI Co has no effect on the direction of MEDIANA CoLtd i.e., MEDIANA CoLtd and BHI go up and down completely randomly.

Pair Corralation between MEDIANA CoLtd and BHI

Assuming the 90 days trading horizon MEDIANA CoLtd is expected to generate 2.35 times less return on investment than BHI. But when comparing it to its historical volatility, MEDIANA CoLtd is 2.17 times less risky than BHI. It trades about 0.15 of its potential returns per unit of risk. BHI Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,330,000  in BHI Co on October 11, 2024 and sell it today you would earn a total of  163,000  from holding BHI Co or generate 12.26% return on investment over 90 days.

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

MEDIANA CoLtd  vs.  BHI Co

MEDIANA CoLtd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIANA CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MEDIANA CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BHI Co

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BHI Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BHI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MEDIANA CoLtd and BHI

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

The idea behind MEDIANA CoLtd and BHI Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.