Correlation Between Fresenius Medical and Vitec Software

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

By analyzing existing cross correlation between Fresenius Medical Care and Vitec Software Group, you can compare the effects of market volatilities on Fresenius Medical and Vitec Software 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 Fresenius Medical with a short position of Vitec Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and Vitec Software.

Diversification Opportunities for Fresenius Medical and Vitec Software

0.49

Correlation Coefficient

Fresenius Medical  Vitec Software

Very weak diversification

The 3 months correlation between Fresenius and Vitec is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Vitec Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitec Software Group and Fresenius Medical 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 Fresenius Medical Care are associated (or correlated) with Vitec Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitec Software Group has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Vitec Software go up and down completely randomly.

Pair Corralation between Fresenius Medical and Vitec Software

Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.93 times more return on investment than Vitec Software. However, Fresenius Medical Care is 1.08 times less risky than Vitec Software. It trades about 0.04 of its potential returns per unit of risk. Vitec Software Group is currently generating about 0.02 per unit of risk. If you would invest  3,709  in Fresenius Medical Care on October 5, 2024 and sell it today you would earn a total of  639.00  from holding Fresenius Medical Care or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.89%
Values	Daily Returns

Fresenius Medical Care  vs.  Vitec Software Group

Fresenius Medical Care

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vitec Software Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vitec Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fresenius Medical and Vitec Software

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

The idea behind Fresenius Medical Care and Vitec Software Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.