Correlation Between Formetal and MEDIPOST

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

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

Diversification Opportunities for Formetal and MEDIPOST

0.45

Correlation Coefficient

Formetal  MEDIPOST

Very weak diversification

The 3 months correlation between Formetal and MEDIPOST is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and MEDIPOST Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIPOST and Formetal 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 Formetal Co 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 Formetal i.e., Formetal and MEDIPOST go up and down completely randomly.

Pair Corralation between Formetal and MEDIPOST

Assuming the 90 days trading horizon Formetal Co is expected to under-perform the MEDIPOST. But the stock apears to be less risky and, when comparing its historical volatility, Formetal Co is 1.5 times less risky than MEDIPOST. The stock trades about 0.0 of its potential returns per unit of risk. The MEDIPOST Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,274,631  in MEDIPOST Co on October 4, 2024 and sell it today you would lose (122,631) from holding MEDIPOST Co or give up 9.62% of portfolio value over 90 days.

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

Formetal Co  vs.  MEDIPOST Co

Formetal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MEDIPOST

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MEDIPOST Co are ranked lower than 15 (%) 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 Formetal and MEDIPOST

The main advantage of trading using opposite Formetal and MEDIPOST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal 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 Formetal Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.