Correlation Between Fresenius Medical and GoldMining

Can any of the company-specific risk be diversified away by investing in both Fresenius Medical and GoldMining 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 GoldMining 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 GoldMining, you can compare the effects of market volatilities on Fresenius Medical and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and GoldMining.

Diversification Opportunities for Fresenius Medical and GoldMining

-0.17

Correlation Coefficient

Fresenius Medical  GoldMining

Good diversification

The 3 months correlation between Fresenius and GoldMining is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and GoldMining go up and down completely randomly.

Pair Corralation between Fresenius Medical and GoldMining

Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.59 times more return on investment than GoldMining. However, Fresenius Medical Care is 1.69 times less risky than GoldMining. It trades about 0.18 of its potential returns per unit of risk. GoldMining is currently generating about -0.07 per unit of risk. If you would invest  3,799  in Fresenius Medical Care on September 13, 2024 and sell it today you would earn a total of  751.00  from holding Fresenius Medical Care or generate 19.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.19%
Values	Daily Returns

Fresenius Medical Care  vs.  GoldMining

Fresenius Medical Care

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 13 (%) 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.

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Fresenius Medical and GoldMining

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

The idea behind Fresenius Medical Care and GoldMining 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..