Correlation Between System and MEDIPOST

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

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

Diversification Opportunities for System and MEDIPOST

0.38

Correlation Coefficient

System  MEDIPOST

Weak diversification

The 3 months correlation between System and MEDIPOST is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and MEDIPOST Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIPOST and System 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 System and Application are associated (or correlated) with MEDIPOST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIPOST has no effect on the direction of System i.e., System and MEDIPOST go up and down completely randomly.

Pair Corralation between System and MEDIPOST

Assuming the 90 days trading horizon System and Application is expected to under-perform the MEDIPOST. But the stock apears to be less risky and, when comparing its historical volatility, System and Application is 1.16 times less risky than MEDIPOST. The stock trades about -0.01 of its potential returns per unit of risk. The MEDIPOST Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,331,770  in MEDIPOST Co on October 6, 2024 and sell it today you would lose (126,770) from holding MEDIPOST Co or give up 9.52% of portfolio value over 90 days.

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

System and Application  vs.  MEDIPOST Co

System and Application

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MEDIPOST

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIPOST Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MEDIPOST sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with System and MEDIPOST

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

The idea behind System and Application and MEDIPOST 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 Global Correlations module to find global opportunities by holding instruments from different markets.