Correlation Between Dynamic Medical and Top Union

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

By analyzing existing cross correlation between Dynamic Medical Technologies and Top Union Electronics, you can compare the effects of market volatilities on Dynamic Medical and Top Union 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 Dynamic Medical with a short position of Top Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Medical and Top Union.

Diversification Opportunities for Dynamic Medical and Top Union

0.57

Correlation Coefficient

Dynamic Medical  Top Union

Very weak diversification

The 3 months correlation between Dynamic and Top is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Medical Technologies and Top Union Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Union Electronics and Dynamic 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 Dynamic Medical Technologies are associated (or correlated) with Top Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Union Electronics has no effect on the direction of Dynamic Medical i.e., Dynamic Medical and Top Union go up and down completely randomly.

Pair Corralation between Dynamic Medical and Top Union

Assuming the 90 days trading horizon Dynamic Medical Technologies is expected to generate 1.13 times more return on investment than Top Union. However, Dynamic Medical is 1.13 times more volatile than Top Union Electronics. It trades about 0.01 of its potential returns per unit of risk. Top Union Electronics is currently generating about -0.04 per unit of risk. If you would invest  8,930  in Dynamic Medical Technologies on October 26, 2024 and sell it today you would earn a total of  60.00  from holding Dynamic Medical Technologies or generate 0.67% return on investment over 90 days.

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

Dynamic Medical Technologies  vs.  Top Union Electronics

Dynamic Medical Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Medical Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dynamic Medical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Top Union Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Union Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Top Union is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dynamic Medical and Top Union

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

The idea behind Dynamic Medical Technologies and Top Union Electronics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.