Correlation Between Grand Pacific and Medeon Biodesign

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

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

Diversification Opportunities for Grand Pacific and Medeon Biodesign

0.37

Correlation Coefficient

Grand Pacific  Medeon Biodesign

Weak diversification

The 3 months correlation between Grand and Medeon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Grand Pacific Petrochemical and Medeon Biodesign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medeon Biodesign and Grand Pacific 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 Grand Pacific Petrochemical are associated (or correlated) with Medeon Biodesign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medeon Biodesign has no effect on the direction of Grand Pacific i.e., Grand Pacific and Medeon Biodesign go up and down completely randomly.

Pair Corralation between Grand Pacific and Medeon Biodesign

Assuming the 90 days trading horizon Grand Pacific Petrochemical is expected to generate 0.41 times more return on investment than Medeon Biodesign. However, Grand Pacific Petrochemical is 2.42 times less risky than Medeon Biodesign. It trades about -0.03 of its potential returns per unit of risk. Medeon Biodesign is currently generating about -0.09 per unit of risk. If you would invest  2,360  in Grand Pacific Petrochemical on September 26, 2024 and sell it today you would lose (75.00) from holding Grand Pacific Petrochemical or give up 3.18% of portfolio value over 90 days.

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

Grand Pacific Petrochemical  vs.  Medeon Biodesign

Grand Pacific Petroc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Pacific Petrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Grand Pacific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Medeon Biodesign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medeon Biodesign 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 latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Grand Pacific and Medeon Biodesign

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

The idea behind Grand Pacific Petrochemical and Medeon Biodesign 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.