Correlation Between MedPacto and ABL Bio

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

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

Diversification Opportunities for MedPacto and ABL Bio

-0.83

Correlation Coefficient

MedPacto  ABL Bio

Pay attention - limited upside

The 3 months correlation between MedPacto and ABL is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding MedPacto and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio and MedPacto 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 MedPacto are associated (or correlated) with ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of MedPacto i.e., MedPacto and ABL Bio go up and down completely randomly.

Pair Corralation between MedPacto and ABL Bio

Assuming the 90 days trading horizon MedPacto is expected to under-perform the ABL Bio. But the stock apears to be less risky and, when comparing its historical volatility, MedPacto is 1.62 times less risky than ABL Bio. The stock trades about -0.19 of its potential returns per unit of risk. The ABL Bio is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,990,000  in ABL Bio on December 29, 2024 and sell it today you would earn a total of  380,000  from holding ABL Bio or generate 12.71% return on investment over 90 days.

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

MedPacto  vs.  ABL Bio

MedPacto

Risk-Adjusted Performance

Very Weak

Over the last 90 days MedPacto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ABL Bio

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ABL Bio are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABL Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MedPacto and ABL Bio

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

The idea behind MedPacto and ABL Bio 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.