Correlation Between Fresenius Medical and Advanced Medical

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

Diversification Opportunities for Fresenius Medical and Advanced Medical

-0.44

Correlation Coefficient

Fresenius Medical  Advanced Medical

Very good diversification

The 3 months correlation between Fresenius and Advanced is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol 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 Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Advanced Medical go up and down completely randomly.

Pair Corralation between Fresenius Medical and Advanced Medical

Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.7 times more return on investment than Advanced Medical. However, Fresenius Medical Care is 1.43 times less risky than Advanced Medical. It trades about 0.18 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about -0.08 per unit of risk. If you would invest  4,153  in Fresenius Medical Care on September 22, 2024 and sell it today you would earn a total of  235.00  from holding Fresenius Medical Care or generate 5.66% return on investment over 90 days.

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

Fresenius Medical Care  vs.  Advanced Medical Solutions

Fresenius Medical Care

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 14 (%) 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.

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fresenius Medical and Advanced Medical

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

The idea behind Fresenius Medical Care and Advanced Medical Solutions 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.