Correlation Between Medy Tox and MEDIPOST

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

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

Diversification Opportunities for Medy Tox and MEDIPOST

-0.75

Correlation Coefficient

Medy Tox  MEDIPOST

Pay attention - limited upside

The 3 months correlation between Medy and MEDIPOST is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Medy Tox and MEDIPOST Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIPOST 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 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 Medy Tox i.e., Medy Tox and MEDIPOST go up and down completely randomly.

Pair Corralation between Medy Tox and MEDIPOST

Assuming the 90 days trading horizon Medy Tox is expected to under-perform the MEDIPOST. But the stock apears to be less risky and, when comparing its historical volatility, Medy Tox is 1.9 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 0.24 of returns per unit of risk over similar time horizon. If you would invest  833,000  in MEDIPOST Co on September 22, 2024 and sell it today you would earn a total of  402,000  from holding MEDIPOST Co or generate 48.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Medy Tox  vs.  MEDIPOST Co

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.

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 Medy Tox and MEDIPOST

The main advantage of trading using opposite Medy Tox and MEDIPOST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medy Tox 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 Medy Tox 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.