Correlation Between Industrial and Allmed Medical

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

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

Diversification Opportunities for Industrial and Allmed Medical

0.66

Correlation Coefficient

Industrial  Allmed Medical

Poor diversification

The 3 months correlation between Industrial and Allmed is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Allmed Medical Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allmed Medical Products and Industrial 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 Industrial and Commercial are associated (or correlated) with Allmed Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allmed Medical Products has no effect on the direction of Industrial i.e., Industrial and Allmed Medical go up and down completely randomly.

Pair Corralation between Industrial and Allmed Medical

Assuming the 90 days trading horizon Industrial is expected to generate 1.57 times less return on investment than Allmed Medical. But when comparing it to its historical volatility, Industrial and Commercial is 2.02 times less risky than Allmed Medical. It trades about 0.18 of its potential returns per unit of risk. Allmed Medical Products is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  713.00  in Allmed Medical Products on September 20, 2024 and sell it today you would earn a total of  175.00  from holding Allmed Medical Products or generate 24.54% return on investment over 90 days.

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

Industrial and Commercial  vs.  Allmed Medical Products

Industrial and Commercial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Allmed Medical Products

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allmed Medical Products are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allmed Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Allmed Medical

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

The idea behind Industrial and Commercial and Allmed Medical Products 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.