Correlation Between Medy Tox and Celltrion Pharm

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

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

Diversification Opportunities for Medy Tox and Celltrion Pharm

0.87

Correlation Coefficient

Medy Tox  Celltrion Pharm

Very poor diversification

The 3 months correlation between Medy and Celltrion is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Medy Tox and Celltrion Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celltrion Pharm and Medy Tox 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 Medy Tox are associated (or correlated) with Celltrion Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celltrion Pharm has no effect on the direction of Medy Tox i.e., Medy Tox and Celltrion Pharm go up and down completely randomly.

Pair Corralation between Medy Tox and Celltrion Pharm

Assuming the 90 days trading horizon Medy Tox is expected to under-perform the Celltrion Pharm. In addition to that, Medy Tox is 1.24 times more volatile than Celltrion Pharm. It trades about -0.15 of its total potential returns per unit of risk. Celltrion Pharm is currently generating about -0.07 per unit of volatility. If you would invest  6,533,333  in Celltrion Pharm on October 1, 2024 and sell it today you would lose (923,333) from holding Celltrion Pharm or give up 14.13% of portfolio value over 90 days.

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

Medy Tox  vs.  Celltrion Pharm

Medy Tox

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medy Tox 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Celltrion Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celltrion Pharm 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Medy Tox and Celltrion Pharm

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

The idea behind Medy Tox and Celltrion Pharm 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.