Correlation Between CU Medical and Dreamus

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

By analyzing existing cross correlation between CU Medical Systems and Dreamus Company, you can compare the effects of market volatilities on CU Medical and Dreamus 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 CU Medical with a short position of Dreamus. Check out your portfolio center. Please also check ongoing floating volatility patterns of CU Medical and Dreamus.

Diversification Opportunities for CU Medical and Dreamus

0.08

Correlation Coefficient

CU Medical  Dreamus

Significant diversification

The 3 months correlation between 115480 and Dreamus is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CU Medical Systems and Dreamus Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreamus Company and CU 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 CU Medical Systems are associated (or correlated) with Dreamus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreamus Company has no effect on the direction of CU Medical i.e., CU Medical and Dreamus go up and down completely randomly.

Pair Corralation between CU Medical and Dreamus

Assuming the 90 days trading horizon CU Medical Systems is expected to under-perform the Dreamus. But the stock apears to be less risky and, when comparing its historical volatility, CU Medical Systems is 1.75 times less risky than Dreamus. The stock trades about -0.05 of its potential returns per unit of risk. The Dreamus Company is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  159,000  in Dreamus Company on December 4, 2024 and sell it today you would earn a total of  13,800  from holding Dreamus Company or generate 8.68% return on investment over 90 days.

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

CU Medical Systems  vs.  Dreamus Company

CU Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days CU Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CU Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreamus Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreamus Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dreamus may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CU Medical and Dreamus

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

The idea behind CU Medical Systems and Dreamus Company 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.